2016controller.admin.ri.gov/documents/financial reports/118...2016/06/30 · state of rhode island...

State of Rhode Island

Comprehensive Annual Financial Report for the year ended June 30, 2016

(updated February 2, 2017)

2016

Gina M. Raimondo, Governor

Department of Administration

Michael DiBiase, Director of Administration

Office of Accounts and Control Peter B. Keenan, CPA, State Controller

Notice February 2, 2017

The Comprehensive Annual Financial Report of the State of Rhode Island for the fiscal year ended June 30, 2016 has been updated to reflect restated amounts for a discretely presented component unit as described below.

On February 1, 2017, the Rhode Island Turnpike and Bridge Authority (Authority), a discretely presented component unit of the State of Rhode Island, reissued its financial statements as of and for the year ended June 30, 2016 to reflect restated amounts. The components of net position of the Authority have been restated without any change to total net position.

Amounts included within the Discretely Presented Component Units on pages 38, 49 and 50 have been updated to reflect the restated amounts for the Authority. The components of net position of the Authority and the aggregate discretely presented components have been restated without any change to total net position.

Note 19 to the basic financial statements has been included on page 152 to describe the nature and effect of the restatement.

The Independent Auditor’s Report on pages 11 through 13 has been reissued. The auditor’s report with respect to Note 19 and the aggregate discretely presented component units opinion is now dated February 2, 2017.

State of Rhode Island and Providence Plantations 2016 Comprehensive Annual Financial Report

Table of Contents Page

Introductory Section

Letter of Transmittal ................................................................................................................................. 3

Certificate of Achievement for Excellence in Financial Reporting ....................................................... 8 Organization Chart ................................................................................................................................... 9 Officials of State Government ................................................................................................................. 10

Financial Section

Independent Auditor's Report - Report of the Auditor General ............................................................. 11

Management’s Discussion and Analysis .................................................................................................... 14

Basic Financial Statements:

Government-wide Financial Statements: Statement of Net Position ................................................................................................................................. 38 Statement of Activities ...................................................................................................................................... 39

Fund Financial Statements:

Balance Sheet – Governmental Funds ............................................................................................................. 40 Reconciliation of the Balance Sheet of the Governmental Funds

to the Statement of Net Position .................................................................................................................. 41 Statement of Revenues, Expenditures, and Changes in Fund

Balances – Governmental Funds ................................................................................................................. 42 Reconciliation of the Statement of Revenues, Expenditures, and Changes in

Fund Balances of the Governmental Funds to the Statement of Activities ............................................. 43 Statement of Net Position – Proprietary Funds .............................................................................................. 44 Statement of Revenues, Expenses, and Changes in Fund Net Position – Proprietary Funds ................................................................................................................. 45 Statement of Cash Flows – Proprietary Funds ............................................................................................... 46 Statement of Fiduciary Net Position – Fiduciary Funds ................................................................................. 47 Statement of Changes in Fiduciary Net Position – Fiduciary Funds ............................................................ 48 Component Unit Financial Statements:

Combining Statement of Net Position ............................................................................................................. 49 Combining Statement of Activities .................................................................................................................. 51

Notes to the Basic Financial Statements ........................................................................................................... 52

Required Supplementary Information:

Budgetary Comparison Schedule – General Fund ................................................................................................. 153 Budgetary Comparison Schedule – Intermodal Surface Transportation Fund .................................................... 156 Notes to Required Supplementary Information - Budget and Actual……………………………………….………… 157 Schedule of State’s Proportionate Share of the Net Pension Liability-Employees’ Retirement System- State Employees- Governmental Activities…………………………………………………………………………..... 159 Schedule of State Contributions-Employees’ Retirement System-State Employees- Governmental Activities……………………………………………………………………………………………………. 160 Schedule of State’s Proportionate Share of the Net Pension Liability-Employees’ Retirement System- State Share-Teachers (Special Funding Situation)…………………………………………………………………… 161 Schedule of State Contributions-Employees’ Retirement System-State Share- Teachers (Special Funding Situation)…………………………………………………………………………………… 162

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State of Rhode Island and Providence Plantations 2016 Comprehensive Annual Financial Report

Table of Contents Page

Schedule of Changes in Net Pension Liability and Related Ratios-State Police Retirement Benefits Trust… 164 Schedule of Changes in Net Pension Liability and Related Ratios-Judicial Retirement Benefits Trust……… 165 Schedule of Changes in Net Pension Liability and Related Ratios-RI Judicial Retirement Fund Trust………. 166 Schedule of State Contributions-State Police Retirement Benefits Trust………………………………………….. 167 Schedule of State Contributions-Judicial Retirement Benefits Trust……………………………………………….. 168 Schedule of State Contributions-RI Judicial Retirement Fund Trust………………………………………………… 169 Schedule of Changes in Total Pension Liability-State Police Non-Contributory Retirement Plan…………….. 171 Schedule of Changes in Total Pension Liability-Judicial Non-Contributory Retirement Plan…………………. . 172 Notes to Required Supplementary Information - Pensions ................................................................................... 173 Schedule of Funding Progress-Other Postemployment Benefits…………………………………………………. .... 175 Notes to Required Supplementary Information-Other Postemployment Benefits .............................................. 176

Combining Financial Statements:

Combining Balance Sheet – Nonmajor Governmental Funds ............................................................................... 179 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances –

Nonmajor Governmental Funds ........................................................................................................................... 180 Budgetary Comparison Schedule – R.I. Temporary Disability Insurance Fund .................................................. 181 Combining Statement of Net Position – Internal Service Funds ........................................................................... 183 Combining Statement of Revenues, Expenses, and Changes in

Net Position – Internal Service Funds.................................................................................................................. 185 Combining Statement of Cash Flows – Internal Service Funds ............................................................................ 187 Combining Statement of Fiduciary Net Position – Pension and Other Employee Benefits Trust Funds ........................................................................................................................... 193 Combining Statement of Changes in Fiduciary Net Position – Pension and Other Employee Benefits Trust Funds ........................................................................................................................... 194

Combining Statement of Fiduciary Net Position – Pension Trust Funds ............................................................ 195 Combining Statement of Changes in Fiduciary Net Position – Pension Trust Funds ........................................ 196

Combining Statement of Fiduciary Net Position – Other Employee Benefits Trust Funds ............................... 197 Combining Statement of Changes in Fiduciary Net Position – Other Employee Benefits Trust Funds ........................................................................................................................... 198 Combining Statement of Fiduciary Net Position – Private Purpose Trust Funds ............................................... 199 Combining Statement of Changes in Fiduciary Net Position – Private Purpose Trust Funds ........................... 200 Combining Statement of Changes in Fiduciary Assets and Liabilities - Agency Funds .................................... 202 Combining Statement of Net Position – Nonmajor Component Units ................................................................. 203 Combining Statement of Activities – Nonmajor Component Units ....................................................................... 205

Statistical Section

Index …… ................................................................................................................................................................... 206 Schedule of Net Position by Components ............................................................................................................. 207 Schedule of Changes in Net Position ...................................................................................................................... 208 Schedule of Fund Balances of Governmental Funds ............................................................................................. 210 Schedule of Changes in Fund Balances of Governmental Funds ........................................................................ 211 Schedule of Taxable Sales by Industry ................................................................................................................... 213 Schedule of Personal Income by Industry ............................................................................................................. 214 Schedule of Personal Income Tax Revenue as a Percent of Personal Income ................................................... 215 Schedule of Personal Income Tax Rates ................................................................................................................. 216 Schedule of Resident Personal Income Tax Filers & Liability by AGI .................................................................. 218 Schedule of Ratios of Outstanding Debt by Type .................................................................................................. 220 Schedule of Pledged Revenue Coverage ................................................................................................................ 221 Schedule of Nominal Personal Income and Per Capita Personal Income ............................................................ 222 Principal Employers .................................................................................................................................................. 223 Full Time State Employees by Function .................................................................................................................. 224 Schedule of Operating Indicators by Function ....................................................................................................... 225 Schedule of Capital Asset Statistics by Function................................................................................................... 226

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Introductory Section

2016

Comprehensive Annual Financial Report

for the year ended June 30, 2016

STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS

DEPARTMENT OF ADMINISTRATION

Peter B. Keenan, CPA, State Controller Office: (401) 222-6408 One Capitol Hill Fax: (401) 222-6437 Providence, RI 02908-5890 [email protected] December 23, 2016 To the Citizens, Governor, and Members of the General Assembly of the State of Rhode Island: In accordance with Section 35-6-1 of the General Laws, I am pleased to submit to you the Comprehensive Annual Financial Report (CAFR) of the State of Rhode Island and Providence Plantations for the fiscal year ended June 30, 2016. INTRODUCTION TO REPORT Responsibility: This report was prepared by the State’s Department of Administration - Office of Accounts and Control. Responsibility for the accuracy, completeness and fairness of the presentation rests with management. To the best of our knowledge and belief, the enclosed data accurately presents the State’s financial position and results of operations in all material aspects in accordance with generally accepted accounting principles (GAAP) as promulgated by the Governmental Accounting Standards Board. Furthermore, we believe this report includes all disclosures necessary to enable the reader to gain an understanding of the State’s financial activities. Independent Auditors: The State’s basic financial statements have been audited by the Office of the Auditor General as required by Section 35-7-10 of the General Laws. The Independent Auditor’s Report is included in the Financial Section of this report. Internal Control Structure: Management of the State is responsible for establishing and maintaining an internal control structure designed to provide reasonable, but not absolute, assurance that the assets of the State are protected from loss, theft, or misuse and that adequate accounting data is compiled to allow for preparation of financial statements in conformity with GAAP. The concept of reasonable assurance recognizes that the cost of a control should not exceed the benefits likely to be derived, and that the evaluation of costs and benefits requires estimates and judgments by management. Managers in all branches and components of government are required to maintain comprehensive internal control systems, to regularly evaluate the effectiveness and adequacy of these systems by internal reviews, and to submit an annual report on these internal controls to the Governor in accordance with the 1986 Financial Integrity and Accountability Act. Financial Reporting Entity: The funds and component units included in the CAFR are those for which the State is accountable, based on criteria for defining the reporting entity as prescribed by GAAP. The criteria include appointing a voting majority of an organization’s governing body and (1) the ability of the State to impose its will on the organization or (2) the potential for the organization to provide specific financial benefits or impose specific financial burdens on the State. Additional information about the State reporting entity can be found in Note 1 to the basic financial statements. Management’s Discussion and Analysis (MD&A): The MD&A immediately follows the independent auditor’s report and provides a narrative introduction, overview, and analysis of the basic financial statements. The MD&A also includes information on a number of important factors that are expected to affect future operations of our State. This letter of transmittal is intended to complement the MD&A and should be read in conjunction with it.

Introductory Section - Letter of Transmittal

3

State of Rhode Island and Providence Plantations

PROFILE OF THE STATE Government Structure: As shown in the organizational chart that follows this transmittal letter, State government is divided into three separate branches: legislative, executive, and judicial. The duties of each branch are outlined in the State’s Constitution, which can be amended only by a majority vote of the State’s citizens, and in the Rhode Island General Laws, which can be amended only by the General Assembly. State government services provided to citizens include building and maintaining roads; providing public safety, health and environmental protection services to protect the general welfare of the State’s citizens; assisting adults, children and families through difficult times resulting from abuse, neglect, illness or unemployment; promoting an attractive business climate to encourage economic development; and protecting natural resources for conservation and recreational activities. The State also provides significant support to its three institutions of higher education and to the public schools.

Budgetary Information: Annual and Long-term: Preparation and submission of the budget is governed by both the State’s Constitution and Rhode Island General Laws. The budget, as enacted by the General Assembly, contains a complete plan of appropriations supported by estimated revenues. Estimated general revenues are determined by a consensus of the Revenue Estimating Conference (Conference), which is made up of the State Budget Officer, the House Fiscal Advisor, and the Senate Fiscal Advisor. The Conference was established to provide a stable and accurate method of financial planning and budgeting to facilitate the adoption of a balanced budget wherein appropriations and expenditures do not exceed anticipated revenues, as is required by the Constitution of Rhode Island. Appropriations for restricted and dedicated revenue sources are supported by estimates submitted by the respective State agencies. There is a State Budget Reserve Account (Reserve) which is maintained within the General Fund. According to the State’s Constitution, general revenue appropriations in the General Fund cannot exceed 97% of available general revenue sources. These sources consist of the current fiscal year’s budgeted general revenue plus the General Fund available balance from the prior fiscal year. Excess revenue is transferred to the Reserve. If the balance in the Reserve exceeds five percent of the total general revenues and opening surplus, the excess is transferred to the Rhode Island Capital Plan Fund to be used for capital projects. The Reserve, or any portion thereof, may be appropriated in the event of an emergency involving the health, safety or welfare of the citizens of the State or in the event of an unanticipated deficit in any given fiscal year, such appropriations to be approved by a majority of each chamber of the General Assembly. A five-year financial projection is prepared annually as part of the Governor's budget submission pursuant to Section 35-3-1 of the Rhode Island General Laws. The five-year financial projection includes tables that present anticipated revenues and expenditures for the ensuing five fiscal years. Also included are tables that provide detail on the planning values used in these projections. The planning values reflect policy assumptions, as well as economic and demographic forecasts. The purpose of the five-year forecast is to provide a baseline fiscal outlook for the State. Although the forecast may be utilized as a benchmark in assessing the affordability and desirability of alternative policy options, caution should be exercised in the interpretation of the forecast. Economic Conditions and Outlook: Rhode Island’s preliminary seasonally adjusted unemployment rate in September 2016 was 5.6 percent. The rate is unchanged from September 2015 and less than half of the recession era high of 11.3 percent. The State’s unemployment rate continued to remain above the U.S. unemployment rate of 5.0 percent in September 2016. While the Rhode Island unemployment rate has remained consistently greater than the national rate, the gap between these two rates has fluctuated between 0.4 and 0.7 percentage points in the twelve months ending with September 2016. In its testimony to the November 2016 Revenue Estimating Conference, IHS Markit (IHS) noted that Rhode Island’s economy is projected to grow sluggishly over the next eight quarters, with Rhode Island non-farm employment growth and Rhode Island personal income growth expected to be below those of the U.S. economy and rank 45th and 50th, respectively, when compared to all fifty states. IHS’ economic analyst also noted that, even under an optimistic scenario of accelerating productivity, stronger global growth and

Introductory Section - Letter of Transmittal 4


a weaker dollar, and heightened capital spending and homebuilding, Rhode Island’s non-farm employment growth is not expected to exceed 1.0 percent annually from 2017 through 2022. The Rhode Island Department of Labor and Training (DLT) testified at the November 2016 Revenue Estimating Conference that Rhode Island lost 39,800 jobs during the Great Recession, and that as of September 2016, the State had recovered 34,300 of those lost jobs, or 86.1 percent. Sectors which have more than recovered the jobs lost in the Great Recession include Professional and Business Services, +7,900; Accommodations and Food Services, +7,700; Arts, Entertainment, and Recreation, +1,500; Transportation and Utilities, +600; and Other Services, +100. Sectors which still have not fully recovered the jobs lost in the Great Recession include: Manufacturing, -10,100; Construction, -6,000; Financial Activities, -3,500; Retail Trade, -3,200; and Wholesale Trade, -600. The Education and Healthcare and Social Assistance sectors did not suffer any job losses during the Great Recession, while the Government and Information sectors have shed even more jobs since the Great Recession. The November 2016 Consensus Economic Forecast indicates that the State will experience its peak rate of growth in non-farm employment in fiscal year 2016 at 1.1 percent, declining to 0.9 percent in fiscal year 2017 and 0.5 percent in fiscal year 2018. Personal income growth is projected to peak later in the forecast cycle, building up to a peak rate of growth of 4.3 percent in both fiscal year 2019 and fiscal year 2020 before declining to 4.1 percent annually for the duration of the forecast period. Wage and salary growth is projected to reach its peak rate of growth in fiscal year 2022 at 4.4 percent. Prior to reaching its peak, wage and salary growth will rise sharply and then stabilize over the fiscal year 2017 through fiscal year 2021 period. Finally, the unemployment rate is expected to remain relatively stable, fluctuating between 5.3 percent and 5.6 percent from fiscal year 2017 through fiscal year 2022. Major Initiatives: The following section highlights several notable initiatives that will likely impact revenue and expenditure trends in fiscal year 2017 and beyond.

• Changes impacting personal income taxes include the exemption of up to $15,000 of pension and annuity income from state personal income tax for filers who have reached full Social Security retirement age, including single filers with adjusted gross incomes of up to $80,000 and joint filers with adjusted gross incomes of up to $100,000. This change is effective for the tax year beginning January 1, 2017. In addition, the value of the Earned Income Tax credit for low and moderate wage earners was increased from 12.5 percent to 15.0 percent of the federal credit, effective January 1, 2017.

• The fiscal year 2017 Budget as Enacted also included legislation that lowered the minimum corporate tax from $450 to $400, effective January 1, 2017.

• The fiscal year 2017 Budget as Enacted makes changes to unemployment insurance taxes that some employers pay and lowers the amount the UI trust fund must hold in reserve. These changes should save Rhode Island employers an estimated $30 million annually from a reduction in unemployment insurance taxes.

The fiscal year 2017 Budget includes one new program and continues a number of economic development initiatives started in fiscal year 2016 that are under the control of the Secretary of Commerce. These include:

• The Air Service Development Fund is a new program that will provide financial support to airlines that create additional direct routes from T. F. Green Airport to major metropolitan areas in the United States.

• The First Wave Closing Fund will provide a company with financing to ensure that certain transactions that are deemed critical to the State’s economy occur.

• The I-195 Redevelopment Project Fund is a fund to provide developers and businesses with financing for capital investment, including land acquisition, in order to promote the development of the land. The Fund would be administered by the I-195 Redevelopment District Commission.



• The Main Street Streetscape Improvement Fund will award loans, matching grants and other forms of financing to enhance sidewalks, signage of public space, and lighting in order to create an attractive environment in local business districts.

• Incentives for Tax Stabilization establishes an incentive program allowing the Commerce Corporation to enter into agreements to reimburse qualifying communities up to ten percent of foregone property tax revenues in exchange for the municipalities providing developers with tax stabilization agreements for redeveloped and rehabilitated properties.

• The Small Business Assistance Program is for businesses with less than 200 employees that are having difficulties obtaining financing from traditional lending organizations. The maximum amount that any one business can obtain from the fund is $750,000, and ten percent of the funding must be set aside for a microloan program to be administered by a third party with expertise in microloans.

• Innovation Vouchers is a program for small businesses with less than 500 employees to purchase research and development support from the State’s institutions of higher education and other providers. The program would allow small businesses to earn $5,000 to $50,000.

• The Innovation Network Grant Program will provide matching grants to support promising companies in advanced industries, technology, and other strategically important sectors.

• Industry Cluster Grants will provide startup and technical assistance grants ranging from $75,000 to $250,000 and provide competitive grants ranging from $100,000 to $500,000 for activities within an industry cluster and for closing industry cluster gaps.

The fiscal year 2017 Budget also continues a number of tax credits and incentive programs, including:

• The Anchor Tax Credit is a tax credit program for businesses that successfully solicit the permanent relocation of a separate business or the permanent relocation of at least ten employees of that separate business. Credits may be applied against corporate income taxes.

• Tax Increment Financing is a program in which the Commerce Corporation may contract with developers to develop or redevelop specific geographic areas in exchange for up to 75.0 percent of State revenues realized as a result of the development project, as calculated by the Division of Taxation.

• The Rebuild Rhode Island Tax Credit is a partially refundable tax credit of up to 30.0 percent of project costs for capital investment projects. It includes a maximum allowable credit of $15.0 million and reporting requirements for both the Commerce Corporation and the Division of Taxation, and it establishes a three-year sunset for the program.

• The New Qualified Jobs Tax Credit is a new job creation and development tax incentive program for businesses. Qualified businesses may receive credits from $2,500 up to $7,500 per new full-time job, subject to certain criteria including the creation of new jobs in targeted industries, jobs created in specific communities, and jobs created by businesses that relocate from out of state. Credits may not exceed the income tax withholdings of the employees in the new jobs.

The fiscal year 2017 Budget also includes a number of initiatives to achieve savings in the Medicaid program from the implementation of the Unified Health Infrastructure Project, which should maximize federal opportunities and improve efficiencies through automated enrollment and enhanced administrative efficiencies.

In addition, the fiscal year 2017 Budget includes additional funding to support a pay increase for direct care workers in the privately operated system for adults with developmental disabilities. General obligation bonds, recently approved by the voters in November 2016, will be issued over the next several years to support the following projects:



• Veterans’ Home - $27.0 million

• URI School of Engineering Phase II - $25.5 million

• URI Affiliated Innovation Campus - $20.0 million

• Green Economy Bond - $35.0 million

• Quonset Point Davisville Pier Infrastructure - $50.0 million

• Port of Providence Infrastructure - $20.0 million

• Affordable Housing and Blight Remediation - $50.0 million

AWARDS AND ACKNOWLEDGMENTS The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the State of Rhode Island and Providence Plantations for the fiscal year ended June 30, 2015 CAFR. This is the fifth consecutive year that Rhode Island has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized CAFR. The report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of only one year. We believe that our fiscal year ended June 30, 2016 CAFR continues to meet the Certificate of Achievement Program’s requirements and we will be submitting it to the GFOA to determine its eligibility for another certificate. The audited financial statements within the CAFR have received an unmodified opinion from the independent auditors. We are proud of this as well as the GFOA award, as they are not guaranteed from year to year. I wish to express my sincere appreciation to the many individuals who assisted and contributed to the timely preparation of this report. It could not have been accomplished without the professionalism, hard work and dedication demonstrated by the entire staff of the Office of Accounts and Control, the Office of the Auditor General, and numerous other State agencies. I also would like to thank the Governor and members of the General Assembly for their interest and support in planning and conducting the financial operations of the State in a very responsible and progressive manner.

Respectfully submitted,

Peter B. Keenan, CPA State Controller



Legislative

Senate

House of Representatives

Judicial

Supreme Court

Superior Court

Family Court

District Court

Traffic Tribunal

Executive

Lieutenant Governor

General Treasurer

Attorney General

Secretary of State

Council on

Post

Secondary

Education

Governor

Organization Chart

Elementary

& Secondary

Education

Council on

Elementary

& Secondary

Education

Board of

Education

Office of

Higher

EducationState Departments

Administration

Business Regulation

Corrections

Environmental Management

Labor & Training

Other Commissions & Agencies

Public Safety

Revenue

Transportation

Executive Office Of Commerce

Executive Office of Health and Human Services:

Behavioral Healthcare, Developmental Disabilities and

Hospitals

Children, Youth & Families

Health

Human Services

As of June 30, 2016

Public Authorities

& Corporations

9

STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS

OFFICIALS OF STATE GOVERNMENT

EXECUTIVE BRANCH

Governor Gina M. Raimondo

Lieutenant Governor

Daniel J. McKee

Secretary of State Nellie M. Gorbea

General Treasurer Seth M. Magaziner

Attorney General Peter F. Kilmartin

LEGISLATIVE BRANCH

Senate President of the Senate M. Teresa Paiva-Weed

House of Representatives Speaker of the House Nicholas A. Mattiello

JUDICIAL BRANCH

Chief Justice of the Supreme Court Paul A. Suttell

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Financial Section

2016



33 Broad Street Suite 201 Providence, RI 02903-4177 tel: 401.222.2435 fax: 401.222.2111

Office of the Auditor General State of Rhode Island and Providence Plantations - General Assembly Dennis E. Hoyle, CPA - Auditor General

oag.ri.gov

INDEPENDENT AUDITOR'S REPORT

Finance Committee of the House of Representatives Joint Committee on Legislative Services, General Assembly, State of Rhode Island and Providence Plantations: Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the State of Rhode Island and Providence Plantations (the State), as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the State’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in

accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We did not audit

the financial statements of:

• the Tobacco Settlement Financing Corporation, a blended component unit which represents 1% of the assets and deferred outflows and 1% of the revenues of the governmental activities and 1% of the assets and 2% of the revenues of the aggregate remaining fund information;

• the Convention Center Authority, a major fund, which also represents 34% of the assets and deferred outflows

and 2% of the revenues of the business-type activities; • the HealthSource RI Trust, an agency fund, the Ocean State Investment Pool, an investment trust fund, and

the Rhode Island Higher Education Savings Trust, a private-purpose trust fund, which collectively represent 43% of the assets and 35% of the revenues of the aggregate remaining fund information; and

• all the component units comprising the aggregate discretely presented component units.

The financial statements for these entities were audited by other auditors whose reports have been furnished to us, and our opinions, insofar as they relate to the amounts included for the governmental activities, the business-type activities, the aggregate discretely presented component units, the Convention Center Authority major fund, and the aggregate remaining fund information, are based solely on the reports of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

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Office of the Auditor General

Finance Committee of the House of Representatives Joint Committee on Legislative Services

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Opinions

In our opinion, based on our audit and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the State, as of June 30, 2016, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Matters of Emphasis

As described in Note 1(U) Changes in Reporting Entity and Note 17(F) Restatements – Net Position, the State’s fiscal 2016 financial statements include the Rhode Island Higher Education Savings Trust as a private-purpose trust. Beginning net position of the fiduciary funds was increased by $7.4 billion. Additionally, beginning net position of the discretely presented component units was increased by a net amount of $516 million primarily to reflect the inclusion of two entities previously considered related organizations.

The fair values of certain investments included within the fiduciary funds - pension and other employee

benefit trusts, which represent 27% of the assets of the pension and other employee benefit trusts and 14% of the assets of the aggregate remaining fund information, have been estimated by management in the absence of readily determinable fair values. Management’s estimates are based on information provided by the fund managers or general partners.

As described in Note 19 Restatement of Components of Net Position, the Rhode Island Turnpike and Bridge

Authority (Authority), a discretely presented component unit, restated the components of its net position at June 30, 2016. The Authority’s auditors have audited the restated amounts and furnished their reissued report to us. The components of net position within the aggregate discretely presented component units have been similarly restated to reflect these revised amounts for the Authority.

Our opinions are not modified with respect to these matters. Other Matters Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis on pages 14 through 37, the Budgetary Comparison Schedules on pages 153 through 157, and information about the State’s pension plans and other postemployment benefit plans on pages 158 through 177 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an

12

Office of the Auditor General

Finance Committee of the House of Representatives Joint Committee on Legislative Services

essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively

comprise the State’s basic financial statements. The supplementary information, such as combining and individual nonmajor fund financial statements on pages 179 through 205 which includes the budgetary comparison schedule for the Temporary Disability Insurance (TDI) Fund on page 181, and the other information, such as the introductory and statistical sections on pages 3 through 10 and pages 207 through 226, respectively, are presented for purposes of additional analysis and are not a required part of the basic financial statements.

The combining and individual nonmajor fund financial statements and the budgetary comparison schedule

for the TDI Fund are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America by us and other auditors. In our opinion, based on our audit, the procedures performed as described above, and the reports of the other auditors, the combining and individual nonmajor fund financial statements and the budgetary comparison schedule for the TDI Fund are fairly stated, in all material respects, in relation to the basic financial statements as a whole.

The introductory and statistical sections have not been subjected to the auditing procedures applied in the

audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we will issue our report on our consideration of the

State’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. That report will be included in the State’s 2016 Single Audit Report. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the State’s internal control over financial reporting and compliance.

Dennis E. Hoyle, CPA Auditor General December 23, 2016, except for Note 19 and our opinion on the aggregate discretely presented component units as to which the date is February 2, 2017.

13

Management’s

Discussion and

Analysis

State of Rhode Island Fiscal Year Ended

June 30, 2016

State of Rhode Island and Providence Plantations Management’s Discussion and Analysis Fiscal Year Ended June 30, 2016

Management’s discussion and analysis (MD&A) provides a narrative overview and analysis of the financial activities of the State of Rhode Island (State) for the fiscal year ended June 30, 2016. The MD&A is intended to serve as an introduction to the State’s basic financial statements, which have the following components: (1) government-wide financial statements, (2) fund financial statements, and (3) notes to the financial statements. The MD&A is designed to (a) assist the reader in focusing on significant financial matters, (b) provide an overview of the State’s financial activities, (c) identify any material changes from the original budget, and (d) highlight individual fund matters. The following presentation is by necessity highly summarized, and in order to gain a thorough understanding of the State’s financial condition, the financial statements, notes and required supplementary information which follow the MD&A should be reviewed in their entirety.

Financial Highlights – Primary Government Government-wide Financial Statements

• Net Position: The total assets plus deferred outflows of resources of the State was less than total liabilities plus deferred inflows of resources on June 30, 2016 by ($294.3) million. This amount is presented as "net position (deficit)" on the Statement of Net Position for the Total Primary Government. Of this amount, ($4.3) billion was reported as unrestricted net position (deficit), $1.0 billion as restricted net position, and $3.0 billion as net investment in capital assets.

• Changes in Net Position: The increase in the primary government’s net position in fiscal year 2016 of $237.9 million which reduced the overall net deficit reported by the State at June 30, 2016 was mostly attributable to the following factors:

• Governmental activities experienced continued revenue growth in fiscal year 2016. A

$47.6 million increase in charges for services was mostly attributable to the General Government and Human Services functions. In addition, general revenues increased by $46.5 million over fiscal year 2015 mostly attributable to an increase in inheritance taxes for a few individually significant return filings and additional fees collected by the Division of Motor Vehicles for purposes of funding the State’s Highway Maintenance fund.

• Total governmental activities expenses increased by $310.3 million in fiscal year 2016. Expenses increased in all functional categories with notable increases in general government and education relating to additional investments in education and economic development initiatives made by the State. Public safety expenses also increased significantly due primarily to pension expense for non-contributory plans of the State Police and Judges being determined based on a lower discount rate in fiscal year 2016. The above increases in total expenses reflect interest and other charges which were reduced by approximately $38 million in fiscal year 2016 resulting from certain debt refundings that are more fully described in the Debt Administration section of this Management’s Discussion and Analysis.

• Business-type activities experienced an increase in net position of $134 million during the fiscal year mostly attributable to the Employment Security Fund operating at a $130.7 million surplus in fiscal year 2016. The Lottery also contributed approximately $369 million in resources to the governmental activities in fiscal year 2016.

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Fund Financial Statements Governmental Funds

• The State's governmental funds reported a combined ending fund balance of $1,161.9 million, a slight decrease of $10.3 million in comparison with the previous fiscal year. This is primarily a result of the decrease in the Other Governmental Funds’ fund balance of $41.4 million, which was due to a number of factors including the expenditure of prior years’ debt proceeds.

• As of June 30, 2016, the State’s General Fund reported an ending fund balance of $509.4

million, a slight increase of $7.5 million as compared to the prior year. This favorable change is primarily attributable to a net increase in tax revenues due to several significant inheritance tax payments which were offset by slight declines, compared to fiscal year 2015, in revenues from personal income and corporate income taxes along with a slight decline in lottery revenue. On the expenditure side, total general revenue expenditures were slightly under budget ($24.7 million) due to careful management and close monitoring in this area.

• As of June 30, 2016, the State’s Intermodal Surface Transportation (IST) Fund reported an

ending fund balance of $136.1 million, an increase of $23.6 million as compared to the prior year. The increase was mainly due to the decrease in debt service principal payments of $33.9 million due to a significant refunding of debt.

Proprietary Funds

• The Rhode Island State Lottery transferred $369.8 million to the General Fund in support of

general revenue expenditures during the fiscal year, a decrease of $12.1 million in comparison with the previous fiscal year. Increased sales of traditional lottery products were more than offset by a decline in video lottery net terminal income revenues of 5.3 percent in fiscal year 2016 as Massachusetts opened its first gaming facility, a slots parlor in nearby Plainville, MA, in late June of 2015.

• The Employment Security Fund ended the fiscal year with a net position of $281.7 million, an

increase of $130.7 million from fiscal year 2015. This favorable change is principally attributable to full repayment of prior borrowings and a slight reduction in benefits paid due to the improving employment level in the State as well as a steady level of tax revenue.

• The Rhode Island Convention Center Authority ended the fiscal year with a net position

deficiency of ($56.9) million, a deficit decrease of $3.4 million compared with the prior year. The Authority has historically had a net position deficiency, because the amount of debt related to capital assets has exceeded the net book value of the capital assets and because the repayment term for the debt is generally longer than the depreciable life of the assets.

Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the State's basic financial statements. The State's basic financial statements include three components:

1. Government-wide financial statements 2. Fund financial statements 3. Notes to the financial statements

This report also contains other supplementary information in addition to the basic financial statements.

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Government-wide Financial Statements The government-wide financial statements provide a broad view of the State's finances. The statements provide both short-term and long-term information about the State's financial position, which assist in assessing the State's financial condition at the end of the year. These financial statements are prepared using the accrual basis of accounting, which recognizes all revenues and grants when earned, and expenses at the time the related liabilities are incurred.

• The Statement of Net Position presents all of the government's assets, deferred outflows of resources, liabilities, and deferred inflows of resources, with the difference reported as "net position." Over time, increases and decreases in the government's net position may serve as a useful indicator of whether the financial position of the State is improving or deteriorating.

• The Statement of Activities presents information showing how the government's net position

changed during the fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Therefore, revenues and expenses are reported in this statement for some items that will not result in cash flows until future fiscal periods -- for example, uncollected taxes and earned but unused vacation leave. This statement also presents a comparison between direct expenses and program revenues for each function of the government.

Both of the government-wide financial statements have separate sections for three different types of activities:

• Governmental Activities: The activities in this section represent most of the State's basic services and are generally supported by taxes, grants and intergovernmental revenues. The governmental activities of the State include general government, human services, education, public safety, natural resources, and transportation. The net position and change in net position of the internal service funds are also included in this column.

• Business-type Activities: These activities are normally intended to recover all or a significant

portion of their costs through user fees and charges to external users of goods and services. These business-type activities of the State include the operations of the Rhode Island Lottery, Rhode Island Convention Center Authority and the Employment Security Trust Fund.

• Discretely Presented Component Units: Component units are entities that are legally

separate from the State, but for which the State is financially accountable. These entities are listed in Note 1. The financial information for these entities is presented separately from the financial information presented for the primary government.

Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The State uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The fund financial statements focus on the individual parts of State government and report the State's operations in more detail than the government-wide financial statements. The State's funds are divided into three categories: governmental, proprietary and fiduciary.

• Governmental funds: Most of the State's basic services are financed through governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, the governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on spendable resources available at the end of the fiscal year. Such information helps determine whether there are

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more or fewer financial resources that can be spent in the near future to finance the State's programs.

Because the focus of governmental funds is narrower than that of the government-wide

financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the State's near-term financial decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and the governmental activities in the government-wide financial statements.

Governmental funds include the general fund, special revenue, capital projects, debt service,

and permanent funds. The State has several governmental funds, of which GASB Statement No. 34, Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments defines the general fund as a major fund. The criteria for determining if any of the other governmental funds are major funds are detailed in Note 1 C. Each of the major funds is presented in a separate column in the governmental funds balance sheet and statement of revenues, expenditures and changes in fund balances. The remaining governmental funds are combined in a single aggregated column on these financial statements. Individual fund data for each of these nonmajor governmental funds can be found in the supplementary information section of the State’s Comprehensive Annual Financial Report.

• Proprietary funds: Services for which the State charges customers a fee are generally

reported in proprietary funds. The State maintains two different types of proprietary funds -- enterprise funds and internal service funds. Enterprise funds report activities that provide supplies and services to the general public. Internal service funds report activities that provide supplies and services for the State's other programs and activities. Similar to the government-wide statements, proprietary funds use the accrual basis of accounting. The State has three enterprise funds -- the Lottery Fund, the Rhode Island Convention Center Authority (RICCA) Fund, and the Employment Security Fund. These funds are each presented in separate columns on the basic proprietary fund financial statements. The State's internal service funds are reported as governmental activities on the government-wide statements, because the services they provide predominantly benefit governmental activities. The State's internal service funds are reported on the basic proprietary fund financial statements in a single combined column. Individual fund data for these funds is provided in the form of combining statements and can be found in the supplementary information section of the State’s CAFR.

• Fiduciary funds: These funds are used to account for resources held for the benefit of parties

outside the State government. Fiduciary funds are not included in the government-wide financial statements because the resources of these funds are not available to support the State's programs. These funds, which include the pension and other post-employment benefits trusts, an external investment trust, a private-purpose trust and agency funds, are reported using accrual accounting. Individual fund data for fiduciary funds can be found in the supplementary information section of the State’s CAFR.

Discretely Presented Component Units Discretely presented component units are legally separate from the primary government. They are financially accountable to the primary government, or have relationships with the primary government such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. These discretely presented component units serve or benefit those outside of the primary government. The State distinguishes between major and nonmajor component units. The criteria for distinguishing between major and nonmajor component units are discussed in Note 1 B.

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Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found immediately following the fiduciary funds financial statements. Required Supplementary Information The basic financial statements and accompanying notes are followed by a section of required supplementary information, including information concerning the State's pension obligations and progress in funding its obligation to provide other post-employment benefits to its employees. This section also includes a budgetary comparison schedule for each of the State's major governmental funds that have a legally enacted budget. Other Supplementary Information Other supplementary information, which follows the required supplementary information in the State’s CAFR, includes the combining financial statements for nonmajor governmental funds, internal service funds and fiduciary funds.

Government-Wide Financial Analysis Net Position As noted earlier, net position may serve over time as a useful indicator of a government's financial position. The State's combined net position (deficit) (governmental and business-type activities) totaled ($294.3) million at the end of fiscal year 2016, compared to ($532.2) million at the end of the prior fiscal year, as restated. Governmental activities reported unrestricted net position (deficit) of ($4,306.3) million. A portion of the State's net position reflects its investment in capital assets such as land, buildings, equipment and infrastructure (roads, bridges, and other immovable assets), less any related debt outstanding that was needed to acquire or construct the assets. The State uses these capital assets to provide services to its citizens; consequently, these assets are not available for future spending. Although the State's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources. An additional portion of the State's net position represents resources that are subject to external restrictions on how they may be used.

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Current and other assets $ 2,218,492 $ 2,180,618 $ 321,087 $ 187,869 $ 2,539,579 $ 2,368,487Capital assets 4,044,868 3,857,807 146,304 154,569 4,191,172 4,012,376

Total assets 6,263,360 6,038,425 467,391 342,438 6,730,751 6,380,863Deferred outf low s of resources 340,857 296,111 6,230 6,431 347,087 302,542Long-term liabilities outstanding 5,822,768 5,451,838 216,946 228,954 6,039,714 5,680,792Other liabilities 1,166,963 1,177,042 49,937 46,335 1,216,900 1,223,377

Total liabilities 6,989,731 6,628,880 266,883 275,289 7,256,614 6,904,169Deferred inflow s of resources 115,200 302,235 300 1,166 115,500 303,401

Net position (deficit):Net investment in capital assets 3,063,627 2,934,439 (57,493) (61,956) 3,006,134 2,872,483Restricted 741,971 841,777 283,901 155,682 1,025,872 997,459Unrestricted (4,306,312) (4,380,849) (19,970) (21,312) (4,326,282) (4,402,161)

Total net position (deficit) $ (500,714) $ (604,633) $ 206,438 $ 72,414 $ (294,276) $ (532,219)

2016 2015*

Activities Activities Government

2016 2015* 2016 2015

PrimaryGovernmental Business-Type

State of Rhode Island's Net Position as of June 30, 2016 and 2015(Expressed in Thousands)

Total

*-Restated. See Note 17 F for an explanation of the restatements. As indicated above, the State reported a balance in unrestricted net position (deficit) of ($4.3) billion as of June 30, 2016. Two primary factors, which are discussed below, contributed to this deficit. The State has adopted Governmental Accounting Standards Board Statement No. 68 Accounting and Financial Reporting for Pensions and Statement No. 73 Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. As required by Statements No. 68 and 73 the State recognizes the net pension liability for all of the pension plans it has funding responsibility for. Recognition of this liability has had a significant adverse impact on unrestricted net position. At June 30, 2016 the net pension liability related to governmental activities was $3.23 billion and the net pension liability related to business-type activities was $15 million. Another significant contributing factor creating the deficit in unrestricted net position is the State’s use of general obligation bond proceeds (which are reported as debt of the primary government) for other than the primary government’s direct capital purposes. In these instances, proceeds are transferred to municipalities, discretely presented component units (including the University of Rhode Island), and non-profit organizations within the State to fund specific projects. As of June 30, 2016 approximately $590.6 million of general obligation bonds related to such projects were outstanding. Examples of these uses of general obligation bond proceeds include, but are not limited to, the following:

• Certain transportation projects funded with bond proceeds that do not meet the State’s criteria for capitalization as infrastructure;

• Construction of facilities at the State’s university and colleges, which are reflected in the

financial statements as discretely presented component units; • Water resources projects including the acquisition of sites for future water supply resources,

various water resources planning initiatives, and funding to upgrade local water treatment facilities;

• Environmental programs to acquire, develop, and rehabilitate local recreational facilities and

ensure that open space is preserved;

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• Historical preservation initiatives designed to protect and preserve historical buildings as well as

to provide funding for cultural facilities.

Other debt that is not utilized for the State’s acquisition of capital assets is as follows:

• Tobacco Settlement Asset-Backed Bonds and Accreted Interest - The Tobacco Settlement Financing Corporation (TSFC), a blended component unit, has issued Tobacco Asset-Backed Bonds that were used to purchase the State’s future rights in the Tobacco Settlement Revenues under the Master Settlement Agreement and the Consent Decree and Final Judgment. The bonds are secured solely by and are payable solely from the tobacco receipts sold to the TSFC and other monies of the TSFC and do not constitute a general, legal, or moral obligation of the State or any political subdivision thereof, and the State has no obligation to satisfy any deficiency or default of any payment of the bonds. As of June 30, 2016 approximately $695.0 million of principal and $85.2 million of accreted interest are included in the State’s debt.

• Historic Tax Credit Bonds - In fiscal years 2009 and 2015 the R.I. Commerce Corporation (RICC),

on behalf of the State, issued $150.0 million and $75.0 million, respectively, of revenue bonds under the Historic Structures Tax Credit Financing Program. The bonds do not constitute a debt, liability, or obligation of the State or any political subdivision thereof. The State is obligated under a Payment Agreement to make payments to the trustee. This obligation is subject to annual appropriation by the General Assembly. The proceeds of the bonds are being used to provide funds for redemption of Historic Structures Tax Credits. As of June 30, 2016, approximately $107.0 million of such bonds are outstanding.

• The State has entered into certain capital lease agreements, known as Certificates of Participation

(COPS), the proceeds of which are to be used, for example, by the State’s university and colleges for energy conservation projects or by local school districts to improve technology infrastructure on a state-wide basis. Obligation of the State to make payments under lease agreements is subject to and dependent upon annual appropriations being made by the General Assembly. As of June 30, 2016, approximately $41.0 million is outstanding relating to these projects.

In the above instances, the primary government records a liability for the outstanding debt, but no related capitalized asset is recorded. A cumulative deficit in unrestricted net position results from financing these types of projects through the years.

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Changes in Net Position The State’s overall net position for the primary government improved by $237.9 million during fiscal year 2016. Total revenues of $8,028.7 million increased by $82.9 million compared to fiscal year 2015. The favorable results were aided by increased general revenues due primarily to several significant non-recurring inheritance tax payments, as well as slight increases related to charges for services as well as operating grants and contributions. The State’s expenses, which cover a wide range of services, increased by $322.9 million. This net increase, which occurred primarily in the education, general government, public safety and transportation categories, was caused by a number of factors including significant investments in education as well as a number of new economic development initiatives. Offsetting these cost increases were savings in debt service costs due to a significant refunding of debt that occurred during fiscal year 2016. A more detailed analysis of changes in revenues and program expenses for both governmental activities and business-type activities is presented after each of the following pie charts.

Revenues:Program revenues:

Charges for services $ 624,753 $ 577,157 $ 1,177,083 $ 1,163,752 $ 1,801,836 $ 1,740,909Operating grants and contributions 2,677,431 2,666,243 1,558 839 2,678,989 2,667,082Capital grants and contributions 178,628 217,604 178,628 217,604

General revenues:Taxes 3,266,347 3,206,935 3,266,347 3,206,935Interest and investment earnings 3,134 3,212 164 186 3,298 3,398Miscellaneous 95,529 108,375 4,106 1,531 99,635 109,906

Total revenues 6,845,822 6,779,526 1,182,911 1,166,308 8,028,733 7,945,834Program expenses:

General government 769,469 695,611 769,469 695,611Human services 3,652,875 3,631,236 3,652,875 3,631,236Education 1,595,289 1,472,786 1,595,289 1,472,786Public safety 545,329 478,854 545,329 478,854Natural resources 87,537 83,979 87,537 83,979Transportation 343,270 283,085 343,270 283,085Interest and other charges 83,899 121,845 83,899 121,845Lottery 507,199 484,293 507,199 484,293Convention Center 48,905 48,628 48,905 48,628Employment Security 157,018 167,527 157,018 167,527

Total expenses 7,077,668 6,767,396 713,122 700,448 7,790,790 7,467,844

Excess (deficiency) before transfers (231,846) 12,130 469,789 465,860 237,943 477,990

Transfers 335,765 345,190 (335,765) (345,190)Special items (5,000) (5,000)

Change in net position 103,919 352,320 134,024 120,670 237,943 472,990

Net position (deficit) - Beginning (596,579) (948,899) 72,414 (48,256) (524,165) (997,155)Cumulative effect of prior period adjustments (8,054) (8,054)

Net position (deficit) - Beginning, as restated (604,633) (948,899) 72,414 (48,256) (532,219) (997,155)

Net position (deficit) - Ending $ (500,714) $ (596,579) $ 206,438 $ 72,414 $ (294,276) $ (524,165)

2016 2015 2015

Activities

2016 2016 2015

Business-TypeGovernmentalActivities Primary Government

State of Rhode Island's Changes in Net PositionFor the Fiscal Year Ended June 30, 2016 and 2015

(Expressed in Thousands)

Total

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Chart 1 depicts the State’s sources of revenues from Governmental Activities for the fiscal year ended June 30, 2016.

Chart 1 - Revenues and Transfers - Governmental Activities

The relative mix of revenue and transfers by source for governmental activities remained fairly constant in fiscal year 2016 versus the prior fiscal year. Taxes continued to represent the largest source of revenue at 46% of the total while operating grants and contributions represented 37% of the total in fiscal year 2016.

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Chart 2 depicts the purposes for which program expenses related to Governmental Activities were expended during the fiscal year ended June 30, 2016.

Chart 2 - Program Expenses - Governmental Activities

General government

11%

Human services52%

Education22%

Public safety8%

Natural resources1% Transportation

5%

Interest1%

The relative mix of program expenses for governmental activities remained about the same in fiscal year 2016 as in the prior fiscal year. There were slight increases in general government expenses due to a number of new economic development programs and transportation as a result of increased investments in this area. A slight decline in interest expense resulted from a significant refunding of debt that occurred during fiscal year 2016.

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Chart 3 depicts the program expenses related to Business Type Activities during the fiscal year ended June 30, 2016.

Chart 3 – Program Expenses – Business Type Activities

The relative mix of expenses for business type activities changed slightly as spending on employment security programs declined due to the improving local economy and lower unemployment rates.

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Financial Analysis of the State’s Funds As noted earlier, the State uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds The focus of the State's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the State's financing requirements. At the end of the current fiscal year, the State's governmental funds reported a combined ending fund balance of $1,161.9 million, a decrease of $10.3 million from June 30, 2015. A breakdown of the components follows (expressed in thousands):

PercentGovernmental Funds

Nonspendable $ 174 $ 174 $Restricted 747,880 795,076 (47,196) -5.94%Unrestricted

Committed 43,150 13,288 29,862 224.73%Assigned 137,114 130,964 6,150 4.70%Unassigned 233,577 232,645 932 0.40%

Total $ 1,161,895 $ 1,172,147 $ (10,252) -0.87%

2016 2015* Change

from 2015Increase (decrease)

*- Reclassified to conform to current year presentation. See Note 7 for more information. In the fund financial statements, governmental funds report fund balance as nonspendable, restricted, committed, assigned or unassigned primarily based on the extent to which the State is bound to honor constraints on how specific amounts can be spent. More Information about each category is presented below:

• Nonspendable fund balance – amounts that cannot be spent because they are either (a) not spendable in form, or (b) legally or contractually required to be maintained intact.

• Restricted fund balance – amounts with constraints placed on their use that are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments, or (b) imposed by constitutional provisions or by law through enabling legislation enacted by the General Assembly.

• Committed fund balance – amounts that can only be used for specific purposes determined by the enactment of legislation by the General Assembly, and that remain binding unless removed in the same manner. The underlying action that imposed the limitation must occur no later than the close of the fiscal year and must be binding unless repealed by the General Assembly.

• Assigned fund balance – amounts that are constrained by the State’s intent that they be used for specific purposes. The intent is generally established by legislation enacted by the General Assembly and is implemented at the direction of the Governor.

• Unassigned fund balance – In the State’s General Fund, the residual classification for amounts not contained in the other classifications. In other funds, the unassigned classification is used only if expenditures incurred for specific purposes exceed the amounts restricted, committed, or assigned to those purposes.

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Significant changes in fund balance are discussed below:

• The $47.2 million decrease in the restricted portion of the fund balance results primarily from expenditures in fiscal year 2016 of the proceeds of certain prior year debt issuances.

• The net increase of $29.9 million in the committed portion of the unrestricted fund balance

primarily resulted from an increase of $26.8 million in the RI Highway Maintenance Account within the Intermodal Surface Transportation Fund. This account, which is funded by a variety of motor vehicle and license related fees, was created by the General Assembly in the 2014 session to address the State’s highway and bridge infrastructure improvement needs.

General Fund The General Fund is the chief operating fund of the State. The fund balance of the General Fund consisted of the following (expressed in thousands):

PercentRestricted $ 133,193 $ 134,231 $ (1,038) -0.77%Unrestricted

Committed 3,975 2,561 1,414 55.21%Assigned 137,114 130,964 6,150 4.70%Unassigned 235,096 234,131 965 0.41%

Total $ 509,378 $ 501,887 $ 7,491 1.49%

2016 2015* Change

Increase (decrease)from 2015

*- Reclassified to conform to current year presentation. See Note 7 for more information. Revenues and other sources of the General Fund totaled $6.6 billion in fiscal year 2016, an increase of $47.8 million or 0.73%, from the previous year. The revenues from various sources and the change from the previous year are shown in the following tabulation (expressed in thousands):

Percent

RevenuesTaxes:

Personal income $ 1,211,678 $ 1,225,561 $ (13,883) -1.13%Sales and use 1,173,770 1,168,852 4,918 0.42%General business 428,573 435,219 (6,646) -1.53%Other 81,519 44,802 36,717 81.95%

Subtotal 2,895,540 2,874,434 21,106 0.73%

Federal grants 2,610,735 2,619,412 (8,677) -0.33%Restricted revenues 241,872 227,631 14,241 6.26%Licenses, fines, sales, and services 355,731 326,003 29,728 9.12%Other general revenues 52,701 59,364 (6,663) -11.22%

Subtotal 3,261,039 3,232,410 28,629 0.89%

Total revenues 6,156,579 6,106,844 49,735 0.81%

Other sourcesTransfer from Lottery 369,761 381,936 (12,175) -3.19%Other transfers 74,210 69,007 5,203 7.54%Capital leases 5,021 5,021

Total revenues and other sources $ 6,605,571 $ 6,557,787 $ 47,784 0.73%

2016 2015

Increase (decrease)

Amount

from 2015

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Fiscal year 2016 personal income taxes fell modestly from fiscal year 2015 levels, declining $13.9 million or 1.1 percent. Final payments, payments made with a return, and extension payments decreased by 10.0 percent while estimated payments rose a modest 2.1 percent. The decrease in final payments and the modest rise in estimated payments reflect the uneven performance of the state’s economy between the two fiscal years. Personal income tax withholding payments decelerated to a rate of growth of 2.5 percent in fiscal year 2016. The tempered increase in withholding tax payments was consistent with the declining rate of decrease in the state’s unemployment rate, from 6.7 percent in fiscal year 2015 to 5.5 percent in fiscal year 2016, and with the slowing of the rate of growth in non-farm employment between the two fiscal years. The State’s unemployment rate continued to decline as, according to IHS Markit, it fell from 6.7 percent in fiscal year 2015 to 5.5 percent in fiscal year 2016, a decline of 1.2 percentage points or slightly more than half as much as the 2.1 percentage points decline experienced between fiscal year 2014 and fiscal year 2015. Nominal personal income growth fell from 4.4 percent in fiscal year 2015 to 3.4 percent in fiscal year 2016. General sales and use tax revenue showed meager gains of 0.9 percent in fiscal year 2016 over fiscal year 2015, attributable in large part to a narrowing of the general sales tax base resulting from the exemption of energy used by non-manufacturing commercial enterprises from the sales and use tax. Fiscal year 2016 motor vehicle use tax revenues increased by 8.7 percent, more than double the 4.0 percent rate of growth between fiscal year 2014 and fiscal year 2015. Sales taxes collected from the provision of prepared meals and beverages increased 7.5 percent in fiscal year 2016, a slight acceleration from the growth rate recorded in fiscal year 2015. General business tax revenues fell by 1.5 percent in fiscal year 2016, driven primarily by a substantial decline in business corporation tax payments of 8.8 percent and financial institutions tax revenues of 7.2 percent. These declines were offset in part by a gain in insurance companies’ gross premiums tax receipts of 8.4 percent, which was realized through an increase in tax revenues from property, casualty and life insurance premiums. Other taxes increased by 82.0 percent over fiscal year 2016. Estate and transfer tax revenues increased by 104.7 percent from fiscal year 2015 levels, due overwhelmingly to the receipt of the two largest estate and transfer tax payments in state history in May and June 2016. Realty transfer taxes rose 9.9 percent from fiscal year 2015 levels, reflecting continued improvement in the state’s housing market. Finally, the R.I. Lottery’s transfer to the General Fund was down 3.2 percent in fiscal year 2016 from fiscal year 2015. Sales of traditional lottery products were up 7.3 percent year-over-year, powered by the largest Powerball jackpot in history which surpassed $1.0 billion in January 2016. This increase in the sales of traditional lottery products was offset by a decline in video lottery net terminal income revenues of 4.3 percent in fiscal year 2016 as Massachusetts opened its first gaming facility, a slots parlor in nearby Plainfield, MA in late June of 2015. Finally, net revenues from the operation of table games at Twin River increased by 22.3 percent in fiscal year 2016.

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Chart 4 depicts the General Fund’s revenues and other sources for the fiscal year ended June 30, 2016.

Chart 4 – Revenues and Other Sources – General Fund

Expenditures and transfers out totaled $6,598.1 million in fiscal year 2016, an increase of $115.5 million, or 1.78%, from the previous year. Changes in expenditures and other uses by function from the previous year are shown in the following tabulation (expressed in thousands):

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PercentGeneral government $ 577,399 $ 518,101 $ 59,298 11.45%Human services 3,694,123 3,661,964 32,159 0.88%Education 1,467,236 1,403,507 63,729 4.54%Public safety 504,217 490,981 13,236 2.70%Natural resources 78,270 79,897 (1,627) -2.04%Debt Service:

Principal 74,705 123,178 (48,473) -39.35%Interest 59,705 61,727 (2,022) -3.28%

Total expenditures 6,455,655 6,339,355 116,300 1.83%

Transfers out 142,425 143,266 (841) -0.59%Total expenditures and transfers out $ 6,598,080 $ 6,482,621 $ 115,459 1.78%

Increase (decrease)

2016 2015 Amountfrom 2015

The significant increase of over $50.0 million in the General Government function is primarily attributable to the Governor’s Economic Development Initiatives under the Executive Office of Commerce. These include the I-195 Redevelopment Fund, the Affordable Housing Fund, the First Wave Closing Fund, Small Business Assistance and the Rebuild RI Fund. The increase of just over $32.0 million in the Human Services function is primarily attributable to further increases in enrollment in the Medicaid program resulting from the Affordable Care Act (ACA). This is also coupled with growth in the regular Medicaid program due to caseload increases. The ACA related costs were still 100 percent federally funded in fiscal year 2016. The primary driver of the increase in the Education function expenditures is the continued transition to the Education Funding Formula, which required over $37.0 million in additional funding in fiscal year 2016. Also in this functional area, $20.0 million was appropriated for the new School Building Authority Fund to be managed by the Rhode Island Health and Educational Building Corporation, a discretely presented component unit, which will provide loans and grants to school districts for improvements to school facilities. Finally, the fiscal year 2016 budget included an increase of over $6.0 million in state support for the three institutions of higher education. The large decline in debt service from fiscal year 2015 to fiscal year 2016 is the result of a restructuring of debt undertaken in July 2015 that freed up resources to be invested in economic development programs. This restructuring resulted in some immediate savings from reissuing debt at lower interest rates, but also deferred some debt service to later years.

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Chart 5 depicts the General Fund’s expenditures and other uses for the fiscal year ended June 30, 2016.

Chart 5 – Expenditures and Other Uses – General Fund

Intermodal Surface Transportation Fund The Intermodal Surface Transportation Fund (IST) is a special revenue fund that accounts for the collection of gasoline tax, motor vehicle registration and licensing fees, federal grants, Rhode Island Capital Plan funds, and bond proceeds that are used for maintenance, upgrading, and construction of the State's surface transportation systems. It also accounts for the proceeds of the Grant Anticipation Revenue Vehicle (GARVEE) and the RI Motor Fuel Tax (RIMFT) revenue bonds, the I-195 Redevelopment District Commission bonds, and related expenditures. The components of the fund balance of the IST fund are as follows (expressed in thousands):

PercentRestricted $ 98,595 $ 103,325 $ (4,730) -4.58%Unrestricted

Committed 39,063 10,637 28,426 267.24%Unassigned (deficit) (1,519) (1,486) (33) -2.22%

Total $ 136,139 $ 112,476 $ 23,663 21.04%

2016 2015* Change

Increase (decrease)from 2015

*- Reclassified to conform to current year presentation.

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The net increase of $28.4 million in the committed portion of the unrestricted fund balance primarily resulted from an increase of $26.8 million in the RI Highway Maintenance Account. This account, which is funded by a variety of motor vehicle and license related fees, was created by the General Assembly in the 2014 session to address the State’s highway and bridge infrastructure improvement needs. General Fund Budgetary Highlights – General Revenue Sources According to the State’s Constitution, general revenue appropriations in the general fund cannot exceed 97% of available general revenue sources. These sources consist of the current fiscal year’s budgeted general revenue plus the general fund undesignated fund balance from the prior fiscal year. Excess revenue is transferred to the State Budget Reserve Account. If the balance in the Reserve exceeds 5% of the total general revenues and opening surplus, the excess is transferred to the R.I. Capital Plan Fund to be used for capital projects. The current fiscal year’s general revenue estimates are established by the State’s revenue estimating conference. If actual general revenue is less than the projection, appropriations have to be reduced or additional revenue sources must be identified. Certain agencies have federal programs that are entitlements, which continue to require State funds to match the federal funds. Agencies may get additional appropriation from the General Assembly, provided a need is established. Adjustments to general revenue receipt estimates resulted in an increase of $91.3 million between the original budget and the final budget. General revenue appropriations increased from the original budget by $20.6 million. Some significant changes between the preliminary and final estimated general revenues and the enacted and final general revenue appropriations (expressed in thousands) are listed below.

Revenues and other sources:Taxes:

Personal income $ 1,215,737 $ 1,224,900 $ 1,217,430 $ (7,470)General business 429,745 441,200 435,203 (5,997)Sales and use 1,166,190 1,182,500 1,173,770 (8,730)Other taxes 31,711 36,600 81,520 44,920

Departmental revenue 357,236 363,800 367,641 3,841Other sources:

Lottery transfer 331,740 370,100 369,761 (339)Unclaimed property 10,000 12,100 14,167 2,067Miscellaneous 1,397 3,829 4,102 273

Total revenues and other sources 3,543,756 3,635,029 3,663,594 28,565

Expenditures and other uses:General government 448,687 466,563 455,148 11,415Human services 1,361,094 1,382,806 1,366,085 16,721Education 1,268,225 1,251,331 1,249,882 1,449Public safety 433,963 431,110 436,216 (5,106)Natural resources 40,020 40,772 40,574 198

Total expenditures and other uses 3,551,989 3,572,582 3,547,905 24,677Excess of revenues and other sources

over expenditures and other uses $ (8,233) $ 62,447 $ 115,689 $ 53,242

Budget Actual Variance

General Fund Budgetary Highlights

Final Budgetvs. Actual

General Revenue Sources

BudgetOriginal Final

The slight positive variance between the fiscal year 2016 actual revenues and the fiscal year 2016 original budget for personal income taxes was reflected in positive variances for the estimated payments,

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final payments and refunds and adjustments components of the personal income tax and negative variances for withholding payments and the net accrual component of the personal income tax. Personal income tax estimated payments were $8.1 million more than the original budget. Personal income tax final payments were $6.4 million above the original budget, while personal income tax refunds and adjustments were $21.9 million less than the original budget. Personal income tax withholding payments were nearly $19.0 million less than the amount included in the original budget. The personal income tax net accrual was $15.8 million less than in the original budget, as the revenue impact of several tax law changes that took effect on January 1, 2015 were accounted for in the net accrual, as were excess personal income tax refunds that were processed in July and August of 2016 that normally would have been paid during fiscal year 2016. Actual fiscal year 2016 general business taxes came in $5.5 million above the original budget due primarily to actual financial institutions and insurance companies gross premiums tax revenues coming in $9.7 million higher than the estimated amount included in the original budget. These realized increases were offset by business corporation tax, public utilities gross earnings tax, and healthcare provider assessment revenues coming in $4.8 million below their originally budgeted amounts. Sales and use tax revenues actually received in fiscal year 2016 outperformed estimated sales and use tax revenues included in the fiscal year 2016 original budget due to stronger than anticipated cigarette and other tobacco products excise tax revenues, general sales and use tax revenues and motor vehicle licenses and fees revenues exceeding the estimates included in the original budget. Finally, the actual fiscal year 2016 Lottery transfer to the General Fund significantly outperformed the estimated Lottery transfer to the General Fund contained in the fiscal year 2016 original budget in the amount of $38.0 million. This outperformance was due in large part to the fact that the onset of slots-only gaming in Massachusetts did not have as significant a negative impact on Rhode Island’s full casino at Twin River and its slots-only facility at Newport Grand as was initially forecast. The positive expenditure variance in the General Government function of approximately $11.4 million was primarily in two agencies, Administration and Legislature. Within Administration, the majority of the positive variance, $1.8 million, was in the Division of Capital Asset Maintenance and Management program due to lower than anticipated energy and repair costs. In addition, several programs had surpluses due to funding enacted for specific projects remaining unspent at year end, which was subsequently approved by the Governor for reappropriation to fiscal year 2017. These included $388,428 for a classification and compensation study and $258,319 for building code training and code book publishing. In the Legislature’s budget the positive variance was $6.3 million. Under Rhode Island law, the entire surplus for the Legislature is reappropriated to fiscal year 2017. The positive variance in the Human Services function of approximately $16.7 million was due to a positive variance of $17.6 million in the Office of Health and Human Services (OHHS), offset by a deficit of $922,000 in the Department of Behavioral Healthcare, Developmental Disabilities and Hospitals (BHDDH). The OHHS positive variance was primarily in the Medicaid program due to final caseloads being lower than estimated by the Caseload Estimating Conference in May 2016. The BHDDH deficit was primarily in the Developmental Disabilities program due to certain savings initiatives not being achieved. The positive variance in the Education function is almost entirely from the Department of Elementary and Secondary Education, due to lower than estimated expenditures for the state’s share of Teachers’ Retirement. Payments are based on actual teacher payrolls, which are difficult to estimate at the time of the budget submission. The negative variance of $5.1 million in Public Safety is almost entirely due to additional unbudgeted personnel costs resulting from an arbitration award to the RI Brotherhood of Correctional Officers.

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Capital Assets and Debt Administration Capital Assets The State's investment in capital assets for its governmental and business-type activities as of June 30, 2016 amounts to $4,191.2 million, net of accumulated depreciation of $2,829.1 million. This investment in capital assets includes land, buildings, improvements, equipment, infrastructure, and construction in progress. The total increase in the State's investment in capital assets for the current fiscal year was approximately 4.66% of net book value (as restated). This increase is primarily caused by investments in the construction and rehabilitation of highways and bridges as well as other infrastructure and major software modernization initiatives. Actual expenditures to purchase or construct capital assets were $370.8 million for the year. Of this amount, $182.0 million was used to construct or reconstruct highways. Depreciation charges for the year totaled $186.5 million.

Capital assets not being depreciatedor amortized

Land $ 393,739 $ 392,753 $ 46,808 $ 46,808 $ 440,547 $ 439,561Works of Art 3,449 2,923 3,449 2,923Intangibles 171,992 170,130 171,992 170,130Construction in progress* 648,279 513,518 293 178 648,572 513,696Total capital assets not being depreciated

or amortized 1,217,459 1,079,324 47,101 46,986 1,264,560 1,126,310

Capital assets being depreciatedor amortized

Land improvements 4,665 3,700 4,665 3,700Buildings 724,551 721,971 234,384 234,384 958,935 956,355Building improvements 372,596 279,919 372,596 279,919Equipment 304,793 294,897 31,104 31,255 335,897 326,152Intangibles 14,040 14,040 175 175 14,215 14,215Infrastructure 4,069,394 3,954,550 4,069,394 3,954,550

5,490,039 5,269,077 265,663 265,814 5,755,702 5,534,891Less: Accumulated depreciation

or amortization 2,662,630 2,498,285 166,460 158,231 2,829,090 2,656,516Total capital assets being depreciated

or amortized 2,827,409 2,770,792 99,203 107,583 2,926,612 2,878,375Total capital assets (net) $ 4,044,868 $ 3,850,116 $ 146,304 $ 154,569 $ 4,191,172 $ 4,004,685

*Certain f iscal year 2015 balances have been restated.

2016 2015 2016 2015

Total

2016 2015

State of Rhode Island's Capital Assets as of June 30, 2016 and 2015(Expressed in Thousands)

Governmental Activities Business-Type Activities Primary Government

Additional information on the State's capital assets can be found in Note 5 to the financial statements of this report. Debt Administration Under the State's Constitution, the General Assembly has no power to incur State debts in excess of $50 thousand without the consent of the people (voters), except in the case of war, insurrection or invasion, or to pledge the faith of the State to the payment of obligations of others without such consent. At the end of the current fiscal year, the State’s governmental activities had total bonded debt outstanding of $2.1 billion, of which $1,051.8 million is general obligation debt, $391.3 million is special obligation debt and $695.0 million is debt of the blended component units. Additionally, accreted interest of $85.2 million has

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been recognized for debt of one blended component unit, which is not scheduled to be paid until 2052. On an overall basis the State's total bonded debt decreased by $36.6 million during fiscal year 2016. This decrease consists of a $28.9 million increase in general obligation debt, a decrease of $44.3 million in special obligation debt, and a decrease of $21.2 million in the blended component units’ debt. The general obligation debt is supported by the full faith and credit of the State. Other obligations subject to annual appropriation by the R.I. General Assembly totaling $316.3 million and $979.3 million are supported by pledged revenue. These obligations are discussed in Notes 6 and 17 G. In July 2015 the State issued $175.2 million of general obligation refunding bonds with interest rates ranging from 2.00% to 5.00%, maturing from 2017 through 2028. These bonds, combined with the premium of $23.8 million, were used to advance refund $190.1 million of bonds with interest rates from 4.00% to 6.00% and maturities from 2016 to 2028. The refunding, which resulted in a reduction of debt service over the term of the bonds of $7.4 million, was designed to take advantage of lower market interest rates. It also reconfigured debt service payments freeing up current resources for critical economic development initiatives.

The State’s assigned general obligation bond ratings are as follows: AA (Stable) by Standard & Poor’s Ratings Services (S&P), Aa2 (Stable) by Moody’s Investor Service, Inc., and AA (Stable) by Fitch Ratings. The State does not have any debt limitation. Bonds authorized by the voters that remain unissued as of June 30, 2016 amounted to $319.6 million; other obligations that are authorized but unissued totaled $174.2 million and are described in Note 6. Additional information on the State's long-term debt can be found in the notes to the financial statements of this report.

Conditions Expected to Affect Future Operations Fiscal Year 2017 Budget The first quarter report for fiscal year 2017 prepared by the State Budget Office contains estimates of annual expenditures based upon analysis of expenditures through the first quarter of fiscal year 2017, as well as caseload and medical assistance expenditure estimates and revenue estimates adopted at the November 2016 Caseload and Revenue Estimating Conferences. The fiscal year 2017 balance, based upon these assumptions, is estimated to reflect a $58.7 million general revenue surplus in the General Fund.

The Budget Office continues to review department and agency fiscal year 2017 expenditure plans in conjunction with the fiscal year 2018 budget process. In the first quarter report for fiscal year 2017 prepared by the State Budget Office, a number of departments, primarily in the human service area as well as the Department of Corrections, are projecting deficits. All changes recommended by the Governor in the fiscal year 2017 enacted appropriations, or adopted revenues, will be incorporated in the supplemental appropriations bill, which under current law must be submitted to the General Assembly in early 2017.

The November Revenue Estimating Conference’s estimates reflect recent revenue trends and expected collections based upon the current economic forecast. On the revenue side, general revenue receipts are expected to be $44.9 million more than enacted for fiscal year 2017. Taxes are expected to exceed enacted estimates by $41.5 million, while departmental revenues and other sources, including lottery revenues, are expected to exceed enacted estimates by $3.3 million. The November Revenue Estimating Conference estimates that revenues will be $3,719.6 million as compared with the enacted estimate of $3,674.7 million for fiscal year 2017.

The November Caseload Estimating Conference estimates reflect, in comparison to the fiscal year 2017 enacted budget, increased general revenue funding for fiscal year 2017 of $4.7 million. This is due to a number of factors, including increased costs for medical assistance programs which were offset to an extent by savings in other programs.

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Lottery Revenue

The General Fund derives more than 10% of general revenue from the Rhode Island Lottery. The Lottery’s gaming operations currently compete with casinos in nearby Connecticut and Massachusetts. In addition, both neighboring States have already approved or are considering additional casino expansion likely to increase gaming competition in New England. The Lottery and the State continually monitor the risk to gaming operations resulting from competition in nearby states. In November 2016 the voters of the state approved a referendum to allow the opening of a new casino/hotel in Tiverton near the Massachusetts border. This facility, which will replace the Newport Grand Casino, will be operated by the same company that operates the Twin River Casino in Lincoln. Pension Benefits The State’s financial statements include the net pension liability for the various defined benefit pension plans covering state employees and teachers. Please see Note 13 for information about each of the State’s pension plans. Legal challenges to pension reforms initiated in prior years have been largely resolved through settlement and legislative enactment of those settlement provisions at the close of fiscal 2015. The changes to benefit provisions resulting from the settlement and subsequent amendment of the statutory provisions regarding pension benefits have been reflected in the net pension liability as well as the actuarially determined contribution rates for fiscal year 2017. The terms of the settlement maintained the majority of the future savings projected in the initial enactment of the Rhode Island Retirement Security Act. With the implementation of GASB Statement No. 68, the accounting measures of pension expense and related liabilities will differ from those used for funding purposes. The accounting measures are likely to be more volatile year to year since the net pension liability reflects the fair value of pension plan assets at June 30 whereas the funding measures use a five-year smoothed actuarial value of assets. Future operations will continue to be affected by the amounts actuarially required to responsibly fund pensions consistent with statutory and actuarial requirements. Similarly, the State’s overall net position will continue to be affected by market conditions affecting the fair value of assets accumulated for future pension benefits and the accounting measures reflecting the changes in those pension liabilities year to year. Other Postemployment Benefits (OPEB) Pursuant to legislation enacted by the General Assembly, the State established a trust in fiscal year 2011 to accumulate assets and pay benefits and other costs associated with its OPEB plans. In addition, effective in fiscal year 2011, all participating employers are required by law to fully fund the actuarially determined annual required contribution. In accordance with GASB Statement No. 45, the State began accounting for retiree health care benefits on an actuarial basis in fiscal year 2008. The most recent actuarial study completed as of June 30, 2015 has determined the State’s net unfunded actuarial liability for all six plans included in the Rhode Island State Employees’ and Electing Teachers OPEB System to be $644.3 million. Based on a discount rate of 5.0%, the State’s and other participating employers’ annual required contribution was $53.4 million. For fiscal year 2016, the State funded the retiree health care program in accordance with law by contributing the actuarially required contribution. At June 30, 2016 the OPEB Trust’s net position was $179.3 million. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and healthcare cost trends. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made

35


about the future. Future changes in healthcare costs, as well as investment returns and other assumptions, could significantly affect the level of contributions required of the State. In fiscal year 2018 the State will be implementing GASB Statement No. 75 – Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. This Statement replaces the requirements of GASB Statement No. 45 related to accounting for other post-employment benefit plans that are administered through trusts or equivalent arrangements. This Statement will require the State to restate opening net position as of July 1, 2017 to recognize its share of the net OPEB liability relating to the OPEB plans it administers. The restatement is expected to reduce net position of the primary government, but the amount of the restatement has not yet been determined. Transportation Funding Initiative In order to address Rhode Island’s continuing issues with deteriorating roads and bridges, in February 2016 a new initiative proposed by the Governor, called RhodeWorks, was enacted by the General Assembly. RhodeWorks calls for investing an additional $1 billion above current plans in transportation infrastructure to fix more than 150 structurally deficient bridges and make repairs to another 500 bridges to prevent them from becoming structurally deficient. The plan also refocuses efforts to expand transit. The plan will be financed by 1) user fees on large commercial trucks, 2) $300 million of new GARVEE debt that will be repaid with federal funds, and 3) $129 million of federal funds made available sooner by restructuring existing federally-funded debt. The plan is expected to save nearly $1 billion over 10 years by addressing transportation infrastructure problems on a more proactive basis. Google Inc. Settlement

An investigation by the United States Attorney’s Office in Rhode Island and the U.S. Food and Drug Administration’s Office of Criminal Investigations Rhode Island Task Force resulted in the forfeiture of $500 million in revenue by Google. Because several State law enforcement agencies participated in the investigation, the State was awarded $110 million of this forfeiture. As of June 30, 2016 the State had spent approximately $31.2 million of the total award and will be able to use the balance of the award in future years. The funds must be utilized for public safety purposes. In September 2016, pursuant to legislation enacted by the General Assembly, the State established a trust to fund and pay benefits that were earned under the provisions of the State Police Non-Contributory Retirement Plan discussed in Note 13. The State deposited $15 million of the Google Inc. settlement funds into the newly established Trust.

Local Government Financial Matters

The State has certain oversight responsibilities with respect to municipalities which are outlined in the General Laws and carried out by the Department of Revenue – Division of Municipal Finance and the Office of the Auditor General. The General Laws give the State, acting through the Department of Revenue, the power to implement three levels of oversight and control: fiscal overseer, budget commission, and state receiver. The State has intervened in certain municipalities in recent years utilizing these powers. Most notably, the City of Central Falls was under the control of a State appointed receiver and subsequently filed for federal bankruptcy protection in August 2011. The Fourth Amended Plan of Debt Adjustment became effective on October 25, 2012 and allowed the City of Central Falls to emerge from bankruptcy. A State fiscal overseer and a budget commission were appointed for the City of East Providence in 2011. In September 2013 it was determined that the fiscal health of the City improved to a level that such oversight was no longer necessary. In addition, a budget commission was appointed for the City of Woonsocket in May 2012. In March 2015 it was determined that the fiscal health of the City improved to a level that such oversight was no longer necessary.

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During the 2014 legislative session, the General Assembly amended the Fiscal Stability Act to extend its provision to fiscally distressed fire districts. At that time, the Central Coventry Fire District was under judicial receivership and had been scheduled for liquidation. The State appointed a Receiver on May 6, 2014 and in December of that year, the Receiver filed for Chapter 9 bankruptcy. The receivership was terminated effective October 1, 2015. The Receiver filed a motion to dismiss the Chapter 9 petition which was granted by the U.S. Bankruptcy Court, effective October 1, 2015.

The State is continually monitoring the financial status of all municipalities and other local governmental entities with the goal of avoiding the need for more extensive intervention. These ongoing monitoring efforts specifically include the City of Providence which has a deficit reduction plan in place as approved by the Office of the Auditor General, and is challenged by significant unfunded pension and OPEB obligations.

Requests for Information This report is designed to provide a general overview of the State’s finances and accountability for all of the State’s citizens, taxpayers, customers, investors and creditors. Questions concerning any of the information provided in this report or requests for additional information should be sent to [email protected]. The State’s Comprehensive Annual Financial Report may be found on the State Controller’s home page, http://controller.admin.ri.gov/index.php. Requests for additional information related to component units should be addressed to the entities as listed in Note 1 of the financial statements.

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http://controller.admin.ri.gov/index.php

Basic

Financial Statements


June 30, 2016

The notes to the financial statements are an integral part of this statement.

Assets and deferred outflowsof resourcesCurrent assets:

Cash and cash equivalents $ 1,001,740 $ 28,364 $ 1,030,104 $ 331,187Funds on deposit with fiscal agent 144,808 201,703 346,511Investments 10,108Receivables (net) 777,802 87,035 864,837 102,480Restricted assets:

Cash and cash equivalents 52,235 2,241 54,476 531,475Investments 128,547Receivables (net) 70,143Other assets 38,291

Due from primary government 58,098Due from component units 4,222 4,222 343Internal balances 2,128 (2,128)Due from other governments and agencies 143,868 1,362 145,230 4,013Inventories 1,796 1,275 3,071 10,412Other assets 6,501 534 7,035 7,391

Total current assets 2,135,100 320,386 2,455,486 1,292,488

Noncurrent assets:Investments 178,070Receivables (net) 24,991 24,991 43,505Due from other governments and agencies 11,026 11,026Restricted assets:

Cash and cash equivalents 48,955Investments 384,013Other assets 2,459,314

Due from component units 47,375 47,375 1,478Capital assets - nondepreciable 1,217,459 47,101 1,264,560 219,033Capital assets - depreciable (net) 2,827,409 99,203 2,926,612 1,809,417Other assets 701 701 157,913

Total noncurrent assets 4,128,260 147,005 4,275,265 5,301,698Total assets 6,263,360 467,391 6,730,751 6,594,186

Deferred outflows of resources 340,857 6,230 347,087 54,282

Liabilities and deferred inflowsof resourcesCurrent Liabilities:

Accounts payable 682,634 17,644 700,278 106,173Due to primary government 4,222Due to component units 58,098 58,098 343Due to other governments and agencies 1,555 1,555Accrued expenses 6,524 6,524Unearned revenue 107,120 107,120 29,225Other current liabilities 129,295 400 129,695 222,952Current portion of long-term debt 189,816 16,506 206,322 214,397Obligation for unpaid prize awards 7,308 7,308

Total current liabilities 1,166,963 49,937 1,216,900 577,312

Noncurrent Liabilities:Due to primary government 47,375Net pension liability 2,113,105 15,074 2,128,179 271,402Net pension liability-special funding situation 1,117,395 1,117,395Net OPEB obligation 8,503 8,503 68,322Unearned revenue 4,353 4,353 14,268Due to component units 1,478Notes payable 34,604Loans payable 45,642Obligations under capital leases 203,114 203,114 3,936Compensated absences 6,632 332 6,964 21,035Bonds payable 2,320,226 197,187 2,517,413 2,738,340Other liabilities 53,793 53,793 359,346

Total noncurrent liabilities 5,822,768 216,946 6,039,714 3,605,748

Total liabilities 6,989,731 266,883 7,256,614 4,183,060

Deferred inflows of resources 115,200 300 115,500 12,080Net position (deficit)

Net investment in capital assets 3,063,627 (57,493) 3,006,134 1,313,097Restricted for:

Capital Projects 146,841 146,841Debt 100,429 2,241 102,670 245,509Assistance to other entities 64,070 64,070Employment insurance programs 152,285 281,660 433,945Other 278,172 278,172 737,779Nonexpendable 174 174 127,710

Unrestricted (4,306,312) (19,970) (4,326,282) 29,233Total net position (deficit) $ (500,714) $ 206,438 $ (294,276) $ 2,453,328

Totals Units

Primary Government

Activities Activities

State of Rhode Island and Providence PlantationsStatement of Net Position

June 30, 2016

Governmental Component


Business - Type

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Primary government:Governmental activities:

General government $ 769,469 $ 229,659 $ 85,197 $ 369 $ (454,244) $ $ (454,244) $Human services 3,652,875 266,091 2,251,782 1,019 (1,133,983) (1,133,983)Education 1,595,289 29,749 197,798 427 (1,367,315) (1,367,315)Public safety 545,329 45,245 39,800 3,137 (457,147) (457,147)Natural resources 87,537 28,655 18,617 4,411 (35,854) (35,854)Transportation 343,270 25,354 84,237 169,265 (64,414) (64,414)Interest and other charges 83,899 (83,899) (83,899)

Total governmental activities 7,077,668 624,753 2,677,431 178,628 (3,596,856) (3,596,856)Business-type activities:

State Lottery 507,199 875,362 368,163 368,163Convention Center 48,905 28,081 (20,824) (20,824)Employment security 157,018 273,640 1,558 118,180 118,180

Total business-type activities 713,122 1,177,083 1,558 465,519 465,519

Total primary government $ 7,790,790 $ 1,801,836 $ 2,678,989 $ 178,628 (3,596,856) 465,519 (3,131,337)

Component units: $ 1,379,259 $ 733,555 $ 538,227 $ 165,735 58,258

General Revenues:Taxes:

Personal income 1,211,419 1,211,419General business 428,418 428,418Sales and use 1,173,905 1,173,905Gasoline 152,122 152,122Other 300,483 300,483

Interest and investment earnings 3,134 164 3,298 43,174Miscellaneous revenue 90,836 4,106 94,942 53,747Gain on sale of capital assets 4,693 4,693

Special items 38,348Transfers (net) 335,765 (335,765)

Total general revenues and transfers 3,700,775 (331,495) 3,369,280 135,269

Change in net position 103,919 134,024 237,943 193,527Net position (deficit) - beginning as restated (604,633) 72,414 (532,219) 2,259,801

Net position (deficit) - ending $ (500,714) $ 206,438 $ (294,276) $ 2,453,328

Business-type

Primary Government

Componentgrants and grants andCapitalOperating

State of Rhode Island and Providence PlantationsStatement of Activities

For the Fiscal Year Ended June 30, 2016(Expressed in Thousands)

activities activitiescontributions Units

Net (Expense) Revenue and Changes in Net Position

Services

Program Revenues

TotalsGovernmental

Functions/Programs ExpensesCharges for

contributions

39


AssetsCash and cash equivalents $ 654,828 $ 60,631 $ 252,970 $ 968,429Funds on deposit with fiscal agent 67,684 77,123 144,807Restricted cash equivalents 52,241 52,241Receivables (net) 698,438 15,783 72,294 786,515Due from other funds 4,054 941 390 5,385Due from other governments

and agencies 107,606 44,256 151,862Loans to other funds 5,918 108,813 114,731Other assets 505 505

Total assets $ 1,471,349 $ 189,295 $ 563,831 $ 2,224,475

Liabilities, deferred inflows ofresources and fund balances

LiabilitiesAccounts payable 596,206 27,092 20,662 643,960Due to other funds 2,340 2,340Due to component units 37,441 7,338 23,908 68,687Loans from other funds 108,813 8 108,821Unearned revenue 98,763 98,763Other liabilities 99,228 10,264 535 110,027

Total liabilities 940,451 44,694 47,453 1,032,598Deferred inflows of resources 21,520 8,462 29,982Fund Balances

Nonspendable 174 174Restricted 133,193 98,595 516,092 747,880Unrestricted

Committed 3,975 39,063 112 43,150Assigned 137,114 137,114Unassigned 235,096 (1,519) 233,577

Total fund balances 509,378 136,139 516,378 1,161,895

Total liabilities, deferred inflows of resources and fund balances $ 1,471,349 $ 189,295 $ 563,831 $ 2,224,475

GovernmentalFunds


OtherGovernmental

Funds

State of Rhode Island and Providence PlantationsBalance Sheet

Governmental FundsJune 30, 2016

Total

General

Intermodal

TransportationSurface

40


Fund balance - total governmental funds $ 1,161,895

Amounts reported for governmental activities in the Statement of Net Position are differentbecause:

Capital Assets used in the governmental activities are not financial resources and therefore arenot reported in the funds.

Capital assets 6,700,929Accumulated depreciation (2,658,729)

4,042,200

Deferred outflows of resources 340,857

Bonds, notes, certificates of participation, accrued interest, net pension liabilities andother liabilities are not due and payable in the current period and therefore arenot recorded in the governmental funds.

Compensated absences (73,396)Bonds payable (2,223,320)

Net premium/discount (187,141)Obligations under capital leases (214,321)

Premium (16,769)Interest payable (21,115)Net pension liabilities (3,230,500)Other liabilities (67,945)

(6,034,507)Other long-term assets and unearned revenue are not available to pay for current-period

expenditures and, therefore, are deferred in the funds.

Receivables 5,674Due from component units 51,597Unavailable revenue 21,624

78,895

Deferred inflows of resources (115,200)

Internal service funds are used by management to charge the costs of certain activities toindividual funds. The net position of the internal service funds is reported withgovernmental activities. 25,146

Net position - total governmental activities $ (500,714)


State of Rhode Island and Providence PlantationsReconciliation of the Balance Sheet of the Governmental Funds

to the Statement of Net PositionJune 30, 2016

41


Revenues:Taxes $ 2,895,540 $ 184,793 $ 186,283 $ 3,266,616Licenses, fines, sales, and services 355,731 22,444 2,201 380,376Departmental restricted revenue 241,872 2,882 244,754Federal grants 2,610,735 254,271 2,865,006Income from investments 1,516 487 1,014 3,017Other revenues 51,185 1,699 47,472 100,356

Total revenues 6,156,579 466,576 236,970 6,860,125Expenditures:

Current:General government 577,399 186,667 764,066Human services 3,694,123 3,694,123Education 1,467,236 1,467,236Public safety 504,217 504,217Natural resources 78,270 37 78,307Transportation 385,174 1,538 386,712

Capital outlays 185,361 185,361Debt service:

Principal 74,705 4,375 24,230 103,310Interest and other charges 59,705 10,680 29,417 99,802

Total expenditures 6,455,655 400,229 427,250 7,283,134

Excess (deficiency) of revenuesover (under) expenditures (299,076) 66,347 (190,280) (423,009)

Other financing sources (uses):Issuance of bonds and notes 72,000 72,000Issuance of refunding bonds 230,280 228,955 459,235Capital leases 5,021 5,021Premiums 38,619 34,897 73,516Transfers in 443,971 15,400 113,198 572,569Payment to refunded

bonds escrow agent (267,327) (265,453) (532,780)Transfers out (142,425) (59,656) (34,723) (236,804)

Total other financing sources (uses) 306,567 (42,684) 148,874 412,757

Net change in fund balances 7,491 23,663 (41,406) (10,252)

Fund balances - beginning 501,887 112,476 557,784 1,172,147

Fund balances - ending $ 509,378 $ 136,139 $ 516,378 $ 1,161,895

OtherGovernmental

Funds

State of Rhode Island and Providence PlantationsStatement of Revenues, Expenditures, and Changes in Fund Balances

Governmental FundsFor the Fiscal Year Ended June 30, 2016


TotalGovernmentalSurface

General Transportation

Intermodal

Funds

42


Net change in fund balances - total governmental funds $ (10,252)

Amounts reported for governmental activities in the Statement of Activities are different because:

Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the costof those assets is allocated over their estimated useful lives and reported as depreciation expense.Current year acquisitions are therefore deducted from expenses on the Statement of Activities, less current year depreciation expense and revenue resulting from current year disposals.

Capital outlay 378,935Depreciation expense (175,778)

203,157Bond, note, and certificate of participation proceeds provide current financial resources to governmental

funds by issuing debt which increases long-term debt in the Statement of Net Position. Repayments ofbond principal is an expenditure in the governmental funds, but the repayment reduces long-termliabilities in the Statement of Net Position.

Principal paid on debt 103,310Debt redeemed and defeased in refunding 493,430Accrued interest and other charges (1,435)Proceeds from sale of debt (531,235)Deferral of premium/discount (73,516)Amortization of premium/discount 29,926Accreted interest paid (11,845)Deferral of refunding gains/losses 21,416Amortization of refunding gains/losses 14,269

44,320Revenues (expenses) in the Statement of Activities that do not provide (use) current financial

resources are not reported as revenues (expenditures) in the governmental funds.

Compensated absences 2,340Pension expenses, net of related deferred outflows (127,088)Program expenses 11,766Program revenue (364)Capital grant revenue (593)General revenue - taxes (268)General revenue-miscellaneous (14,537)

(128,744)Internal service funds are used by management to charge the costs of certain activities to individual funds.

The change in net position of the internal service funds is reported with governmental activities. (4,562)

Change in net position - total governmental activities $ 103,919


State of Rhode Island and Providence PlantationsReconciliation of the Statement of Revenues, Expenditures, and

Changes in Fund Balances of the Governmental Funds to the Statement of ActivitiesFor the Fiscal Year Ended June 30, 2016

43


Assets and deferred outflowsof resourcesCurrent assets:

Cash and cash equivalents $ 20,965 $ 6,332 $ 1,067 $ 28,364 $ 33,304Restricted cash and cash equivalents 2,241 2,241Funds on deposit with fiscal agent 201,703 201,703Receivables (net) 5,501 1,311 80,223 87,035 13,636Due from other funds 444 269 713 1,023Due from other governments and agencies 1,362 1,362Inventories 1,275 1,275 1,796Other assets 42 492 534 5,996

Total current assets 28,227 10,645 284,355 323,227 55,755

Noncurrent assets:Capital assets - nondepreciable 47,101 47,101Capital assets - depreciable (net) 368 98,835 99,203 2,668Other assets 701 701

Total noncurrent assets 368 146,637 147,005 2,668Total assets 28,595 157,282 284,355 470,232 58,423

Deferred outflows of resources 1,399 4,831 6,230

Liabilities and deferred inflowsof resourcesCurrent liabilities:

Accounts payable 12,124 5,516 4 17,644 22,432Due to other funds 1,679 172 990 2,841 1,940Due to other governments and agencies 1,555 1,555Loans from other funds 5,910Accrued expenses 6,524 6,524Unearned revenue 625 4,208 4,833Other current liabilities 395 5 400 2,995Bonds payable 11,440 11,440Compensated absences 233 233Obligation for unpaid prize awards 7,308 7,308

Total current liabilities 28,888 21,336 2,554 52,778 33,277

Noncurrent liabilities:Net pension liability 15,074 15,074Unearned revenue 3,750 462 141 4,353Bonds payable 197,187 197,187Compensated absences 332 332

Total noncurrent liabilities 19,156 197,649 141 216,946

Total liabilities 48,044 218,985 2,695 269,724 33,277

Deferred inflows of resources 300 300

Net Position (Deficit)Net investment in capital assets 368 (57,861) (57,493) 2,668Restricted for:

Debt 2,241 2,241Employment insurance programs 281,660 281,660

Unrestricted (18,718) (1,252) (19,970) 22,478Total net position (deficit) $ (18,350) $ (56,872) $ 281,660 $ 206,438 $ 25,146

GovernmentalActivitiesEnterprise Funds

Lottery Center

Business-type Activities--

InternalR.I.

ConventionSecurity Totals Service Funds

R.I. State Employment

State of Rhode Island and Providence PlantationsStatement of Net Position

June 30, 2016(Expressed in Thousands)

Proprietary Funds

44


Operating revenues:Charges for services $ $ 27,781 $ 269,159 $ 296,940 $ 314,894Lottery sales 260,833 260,833Video lottery, net 488,691 488,691Table games 125,838 125,838Federal grants 1,558 1,558Miscellaneous 300 4,481 4,781

Total operating revenues 875,362 28,081 275,198 1,178,641 314,894

Operating expenses:Personal services 10,301 15,673 25,974 13,417Supplies, materials, and services 337,408 12,560 349,968 306,007Prize awards, net of prize recoveries 159,379 159,379Depreciation and amortization 111 10,423 10,534 169Benefits paid 157,018 157,018

Total operating expenses 507,199 38,656 157,018 702,873 319,593

Operating income (loss) 368,163 (10,575) 118,180 475,768 (4,699)

Nonoperating revenues (expenses):Interest revenue 163 1 164 117Other nonoperating revenue 939 3,167 4,106 20Interest expense (10,249) (10,249)

Total nonoperating revenue (expenses) 1,102 (10,248) 3,167 (5,979) 137

Income (loss) before transfers 369,265 (20,823) 121,347 469,789 (4,562)

Transfers in 444 24,209 9,449 34,102Transfers out (369,761) (106) (369,867)

Change in net position (52) 3,386 130,690 134,024 (4,562)

Net position (deficit) - beginning (18,298) (60,258) 150,970 72,414 29,708

Net position (deficit) - ending $ (18,350) $ (56,872) $ 281,660 $ 206,438 $ 25,146

State of Rhode Island and Providence PlantationsStatement of Revenues, Expenses and Changes in Fund Net Position

Proprietary FundsFor the Fiscal Year Ended June 30, 2016


R.I.Convention

CenterR.I. StateLottery

Business-type Activities--Enterprise Funds

GovernmentalActivities

InternalService FundsSecurity

EmploymentTotals

45


Cash flows from operating activities:Cash received from gaming activities $ 875,903 $ $ $ 875,903 $Cash received from customers 29,439 267,593 297,032 311,932Cash received from grants 1,558 1,558Cash payments for gaming activities (491,121) (491,121)Cash payments to suppliers (4,718) (12,879) (17,597) (303,374)Cash payments to employees (9,544) (15,269) (24,813) (13,824)Cash payments for benefits (148,783) (148,783)Other operating revenue (expense) 65 65 20

Net cash provided by (used for) operating activities 370,520 1,291 120,433 492,244 (5,246)Cash flows from noncapital financing activities:

Payment of interest on loan from federal government (34) (34)Loans from other funds 9,563Loans to other funds (10,837)Repayment of loans to other funds 11,310Repayment of loans from other funds (10,125)Transfers in 24,177 10,490 34,667Transfers out (369,414) (148) (369,562)Net transfers from (to) fiscal agent (130,483) (130,483)

Net cash provided by (used for) noncapital financing activities (369,414) 24,177 (120,175) (465,412) (89)Cash flows from capital and related financing activities:

Principal paid on capital obligations (11,332) (11,332)Interest paid on capital obligations (11,709) (11,709)Acquisition of capital assets (24) (1,981) (2,005) (49)

Net cash provided by (used for) capital and related financing activities (24) (25,022) (25,046) (49)Cash flows from investing activities:

Interest on investments 163 1 164 117Net cash provided by investing activities 163 1 164 117Net increase (decrease) in cash and cash equivalents 1,245 447 258 1,950 (5,267)

Cash and cash equivalents, July 1 19,720 8,126 809 28,655 38,571Cash and cash equivalents, June 30 $ 20,965 $ 8,573 $ 1,067 $ 30,605 $ 33,304

Reconciliation of operating income (loss) to net cashprovided by (used for) operating activities:Operating income (loss) 368,163 (10,575) 118,180 475,768 (4,699)Adjustments to reconcile operating income (loss)

to net cash provided by (used for) operatingactivities:

Depreciation and amortization 111 10,423 10,534 169Other revenue (expense) and transfers in (out) 313 65 378 20Net changes in assets and liabilities:

Receivables, net (78) (483) (1,474) (2,035) (3,582)Operating revenue deposited directly with the fiscal agent 3,662 3,662Inventory (363) (363) 1,316Deferred outflows of resources (216) (216)Prepaid items 56 56Due to / due from transactions (61) (61)Accounts and other payables (2,139) 29 (2,110) 1,937Accrued expenses 2,083 2,083 (407)Net pension liability 1,758 1,758Deferred inflows of resources (866) (866)Unearned revenue 87 1,841 1,928Prize awards payable 1,728 1,728

Total adjustments 2,357 11,866 2,253 16,476 (547)Net cash provided by (used for) operating activities $ 370,520 $ 1,291 $ 120,433 $ 492,244 $ (5,246)


Business-type Activities-- GovernmentalEnterprise Funds Activities

Lottery Security Totals

State of Rhode Island and Providence PlantationsStatement of Cash Flows

Proprietary FundsFor the Fiscal Year Ended June 30, 2016

Service FundsR.I. State Employment Internal

R.I.Convention

Center

46


AssetsCash and cash equivalents $ 9,846 $ $ $ 14,882Deposits held as security for entities

doing business in the State 57,212Advance held by claims processing agent 775Receivables

Contributions 65,358Plan participant units sold 9,125Due from State for teachers 23,190Due from other plans 30Other 2,394Miscellaneous 199 2,314 2,939

Total receivables 91,171 11,439 2,939

Prepaid expenses 5,611

Investments, at fair valueEquity in short-term investment fund 1,869Equity in pooled trust 7,703,467Other investments 516,133 6,696,027

Total investments 8,219,600 1,869 6,696,027

Total assets 8,327,003 1,869 6,707,466 $ 75,033

Liabilities

Accounts payable 6,188 17,398 3,176Due to other plans 30Incurred but not reported claims 1,614Due to other funds 2,249Deposits held for others 71,857

Total liabilities 10,081 17,398 $ 75,033

Net positionRestricted for:

Pension benefits 8,136,796Other postemployment benefits 180,126Pool participants 1,869Tuition savings program 6,687,526Other 2,542

Total net position $ 8,316,922 $ 1,869 $ 6,690,068

Pension andInvestment Trust

FundsEmployee Purpose AgencyOcean State

Investment Pool

Other

State of Rhode Island and Providence PlantationsStatement of Fiduciary Net Position

June 30, 2016(Expressed in Thousands)

Fiduciary Funds

Private

Benefit Trusts Trusts

47


AdditionsContributions

Member contributions $ 204,205 $ $Employer contributions 430,987Supplemental employer contributions 408State contributions for teachers 87,998Interest on service credits purchased 145Service credit transfer payments 13,406From program participants 41 765,916

Total contributions 737,149 41 765,916

Other income 1,807

Investment incomeNet appreciation (depreciation) in fair value of investments (69,096) (295,110)Interest 59,174 9Dividends 23,249 214,370Other investment income 10,996 145

24,323 9 (80,595)Less: investment expense 20,220 2

Net investment income 4,103 7 (80,595)

Total additions 743,059 48 685,321Deductions

Retirement benefits 928,232Death benefits 3,482Distributions 9,225 1,738Program participant redemptions 1,351,248Refund of contributions 8,046Administrative expense 8,738 63,975Service credit transfers 13,406OPEB benefits 38,519

Total deductions 1,009,648 1,738 1,415,223Change in net position:

Pension benefits (299,329)Other postemployment benefits 32,740Tuition Savings Program (729,789)Other (1,690) (113)

Fiduciary net position - beginning, as restated 8,583,511 3,559 7,419,970

Fiduciary net position - ending $ 8,316,922 $ 1,869 $ 6,690,068

Pension andInvestment TrustOther Private

Benefit Trusts TrustsOcean State

Investment PoolEmployee Purpose

State of Rhode Island and Providence PlantationsStatement of Changes in Fiduciary Net Position

For the Fiscal Year Ended June 30, 2016Fiduciary Funds


48

State of Rhode Island and Providence PlantationsCombining Statement of Net Position

Component UnitsJune 30, 2016



Assets and deferred outflowsof resourcesCurrent Assets:

Cash and cash equivalents $ 30,675 $ 5,968 $ 187 $ 4,055 $ 13,198Investments 215Receivables (net) 18,798 1,776 1,166 51Restricted assets:

Cash and cash equivalents 24,038 34,845 56 12,126Investments 3,939 3,507 27,524Receivables (net) 1,348 523 786Other assets 44

Due from primary government 299 1,363 25,056 6,745 1,508Due from other governments 18 2,728Due from other component units 26Inventories 1,578 64Other assets 533 262 46 461 114

Total current assets 79,674 48,270 25,363 16,948 55,371Noncurrent Assets:

Investments 1,038 1,005 7,458Receivables (net) 490 5,652Restricted assets:

Cash and cash equivalents 33,932 9,455Investments 2,263 18,999 64,088Receivables (net) 302Other assets

Capital assets - nondepreciable 62,378 129 12,592 757Capital assets - depreciable (net) 494,902 103 131,767 194,917Due from other component unitsOther assets, net of amortization 890 287

Total noncurrent assets 594,855 35,678 287 145,364 267,220

Total assets 674,529 83,948 25,650 162,312 322,591Deferred outflows of resources 1,916 512 16,446Liabilities and deferred inflows

of resourcesCurrent liabilities:

Accounts payable 7,399 407 109 6,322 12,329Due to primary government 539Due to other component units 235Unearned revenue 443 4,780 56 179Other liabilities 12,476 1,635 151 6,659 4,373Current portion of long-term debt 15,512 2,560 4,810

Total current liabilities 36,065 9,382 316 13,699 21,512Noncurrent liabilities:

Due to primary government 390 13,108Due to other component units 1,478Unearned revenue 14,038Notes payableLoans payable 41,541Obligations under capital leasesNet pension liability 2,226 273 52,200Net OPEB obligation 55,534Other liabilities 26,733 11,169Compensated absences 365Bonds payable 255,994 21,584 38,400 184,292

Total noncurrent liabilities 301,629 62,628 38,400 132,376 184,292

Total liabilities 337,694 72,010 38,716 146,075 205,804Deferred inflows of resources 44 380 1,793 30Net position (deficit)Net investment in capital assets 260,203 232 130,712 68,667Restricted for:

Debt 35,353Other 39,120 25,000Other nonexpendable 20,733

Unrestricted 39,384 (8,895) (38,066) (99,822) 12,737

Total net position (deficit) $ 338,707 $ 12,070 $ (13,066) $ 30,890 $ 116,757

(Continued)

RITBARIAC RIPTARICC I-195 RDC

49


Component UnitsJune 30, 2016




Cash and cash equivalentsInvestmentsReceivables (net)Restricted assets:

Cash and cash equivalentsInvestmentsReceivables (net)Other assets

Due from primary governmentDue from other governmentsDue from other component unitsInventoriesOther assets

Total current assetsNoncurrent Assets:

InvestmentsReceivables (net)Restricted assets:


Capital assets - nondepreciableCapital assets - depreciable (net)Due from other component unitsOther assets, net of amortization

Total noncurrent assets

Total assetsDeferred outflows of resourcesLiabilities and deferred inflows


Accounts payableDue to primary governmentDue to other component unitsUnearned revenueOther liabilitiesCurrent portion of long-term debt

Total current liabilitiesNoncurrent liabilities:

Due to primary governmentDue to other component unitsUnearned revenueNotes payableLoans payableObligations under capital leasesNet pension liabilityNet OPEB obligationOther liabilitiesCompensated absencesBonds payable

Total noncurrent liabilities

Total liabilitiesDeferred inflows of resourcesNet position (deficit)Net investment in capital assetsRestricted for:

DebtOtherOther nonexpendable

Unrestricted

Total net position (deficit)

$ 141,946 $ 30,704 $ 20,920 $ 83,534 $ 331,1879,893 10,108

49,999 5,772 2,043 22,875 102,480

460,410 531,47593,577 128,54767,486 70,14338,247 38,291

4,761 10,621 1,524 6,221 58,098648 619 4,013

317 3434,010 262 895 3,603 10,4121,340 35 179 4,421 7,391

202,056 47,394 26,209 791,203 1,292,488

138,705 26,454 3,170 240 178,07021,102 3,747 10 12,504 43,505

1,750 714 3,104 48,955298,663 384,013

1,046,128 1,046,43016,907 1,182 1,394,795 1,412,88418,695 24,853 7,249 92,380 219,033

633,816 119,420 75,390 159,102 1,809,4171,478 1,478

1,859 7 154,870 157,913

832,834 176,377 85,819 3,163,264 5,301,698

1,034,890 223,771 112,028 3,954,467 6,594,18610,153 3,243 2,307 19,705 54,282

47,251 12,044 4,468 15,844 106,1731,970 1,033 680 4,222

108 34316,511 3,410 2,433 1,413 29,2254,239 5,533 5,673 182,213 222,952

10,647 949 266 179,653 214,397

80,618 22,969 13,520 379,231 577,312

11,780 19,142 2,955 47,3751,478

230 14,2681,010 33,594 34,604

579 3,522 45,6423,538 398 3,936

113,016 39,783 29,073 34,831 271,40212,788 68,322

11,819 4,415 10 305,200 359,34617,082 1,230 84 2,274 21,035

206,490 16,580 2,082 2,012,918 2,738,340

364,304 82,160 34,204 2,405,755 3,605,748

444,922 105,129 47,724 2,784,986 4,183,0602,251 792 705 6,085 12,080

433,219 113,032 76,655 230,377 1,313,097

210,156 245,50974,859 5,904 1,216 591,680 737,77987,264 17,509 2,204 127,7102,528 (15,352) (14,169) 150,888 29,233

$ 597,870 $ 121,093 $ 65,906 $ 1,183,101 $ 2,453,328

(Concluded)

TotalsRIC CCRI

OtherComponent

UnitsURI

50

State of Rhode Island and Providence PlantationsCombining Statement of Activities

Component UnitsFor the Fiscal Year Ended June 30, 2016



Expenses $ 86,991 $ 57,641 $ 1,811 $ 120,490 $ 27,739 $ 513,536 $ 148,624 $ 121,482 $ 300,945 $ 1,379,259

Program revenues:Charges for services 70,718 4,115 83 22,692 20,872 325,226 71,659 36,220 181,970 733,555Operating grants and contributions 3,404 26,709 76,102 164,751 73,494 83,989 109,778 538,227Capital grants and contributions 27,434 13,136 15,701 46,471 17,158 3,359 42,476 165,735

Total program revenues 98,152 7,519 26,792 111,930 36,573 536,448 162,311 123,568 334,224 1,437,517

Net (Expenses) Revenues 11,161 (50,122) 24,981 (8,560) 8,834 22,912 13,687 2,086 33,279 58,258

General revenues:Interest and investment earnings 241 7,703 18 697 (5,370) (434) 51 40,268 43,174Miscellaneous revenue (21) 50,693 391 141 (1,578) 452 3,669 53,747

Total general revenue 220 58,396 409 838 (6,948) 18 51 43,937 96,921

Special items 38,348 38,348

Change in net position 11,381 8,274 24,981 (8,151) 9,672 15,964 13,705 2,137 115,564 193,527

Net position (deficit) - beginning as restated 327,326 3,796 (38,047) 39,041 107,085 581,906 107,388 63,769 1,067,537 2,259,801Net position (deficit) - ending $ 338,707 $ 12,070 $ (13,066) $ 30,890 $ 116,757 $ 597,870 $ 121,093 $ 65,906 $ 1,183,101 $ 2,453,328

RIPTA TotalsCCRIURI RICRITBA

OtherComponent

UnitsRIAC RICC I-195 RDC

51

State of Rhode Island and Providence Plantations Notes to Basic Financial Statements Fiscal Year Ended June 30, 2016

Index

Note 1. Summary of Significant Accounting Policies ...........................................................56

A. Basis of Presentation ...............................................................................................56

B. Reporting Entity ........................................................................................................56

C. Financial Statement Presentation ...........................................................................61

D. Measurement Focus and Basis of Accounting .....................................................64

E. Cash and Cash Equivalents .....................................................................................64

F. Funds on Deposit with Fiscal Agent .......................................................................64

G. Investments ...............................................................................................................65

H. Receivables ................................................................................................................65

I. Due From Other Governments and Agencies .........................................................65

J. Interfund Activity .......................................................................................................65

K. Inventories .................................................................................................................65

L. Capital Assets ............................................................................................................65

M. Bonds Payable ..........................................................................................................66

N. Obligations Under Capital Leases ..........................................................................66

O. Pensions ....................................................................................................................67

P. Compensated Absences ..........................................................................................67

Q. Other Assets and Liabilities ....................................................................................67

R. Deferred Outflows of Resources and Deferred Inflows of Resources ...............67

S. Fund Balances ...........................................................................................................68

T. Recently Issued Accounting Standards .................................................................69

U. Changes in Reporting Entity....................................................................................70

Note 2. Cash, Cash Equivalents, Investments, and Funds in Trust ....................................70

A. Primary Government-Governmental and Business-Type Activities ...................70

B. Concentration of Credit Risk ...................................................................................76

C. Pension Trusts ..........................................................................................................76

D. OPEB Trust Funds ....................................................................................................88

E. Private Purpose Trusts .............................................................................................90

52


F. Agency Funds ............................................................................................................90

Note 3. Receivables ..................................................................................................................91

Note 4. Intra-Entity Receivables and Payables ......................................................................91

Note 5. Capital Assets ...............................................................................................................92

Note 6. Long-Term Liabilities ..................................................................................................94

A. Changes in Long-Term Liabilities ...........................................................................94

B. Bonds Payable ...........................................................................................................95

C. Notes Payable ............................................................................................................100

D. Loans Payable ...........................................................................................................101

E. Obligations Under Capital Leases ...........................................................................101

F. Defeased Debt ............................................................................................................102

G. Conduit Debt ..............................................................................................................102

H. Job Creation Guaranty Program – Moral Obligations ..........................................103

I. Pollution Remediation Liabilities ............................................................................104

J. Compensated Absences ...........................................................................................104

K. Arbitrage Rebate .......................................................................................................105

L. Due to the Primary Government ..............................................................................105

M. Other Long-Term Liabilities .....................................................................................105

Note 7. Net Position/Fund Balances ........................................................................................105

Note 8. Taxes ..............................................................................................................................107

Note 9. Transfers ........................................................................................................................108

Note 10. Operating Lease Commitments ................................................................................108

Note 11. Commitments ..............................................................................................................109

Note 12. Contingencies .............................................................................................................112

53


Note 13. Employer Pension Plans ...........................................................................................119

A. Summary of Employer Plans ..................................................................................119

B. Defined Benefit Plan Descriptions – Advance Funded Plans ............................120

C. Defined Benefit Advance Funded Plans - Summary of Significant Accounting Policies ................................................................................................125

D. Defined Benefit Plan Descriptions – Non-Contributory (pay-as-you-go) Pension Plans ..........................................................................................................125

E. Special Funding Situation – ERS Plan – Teachers ..............................................126

F. Contributions and Funding Policy .........................................................................126

G. Net Pension Liability ...............................................................................................127

H. Changes in the Net Pension Liability ....................................................................131

I. Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources ...............................................................................................132

J. Defined Benefit Plan - LIUNA ..................................................................................134

K. Defined Contribution Plan - ERS ...........................................................................134

L. Defined Contribution Plan - FICA Alternative Retirement Income Security Program ...............................................................................................135

M. Other Pension Plans – Component Units ............................................................135

Note 14. Other Post-Employment Benefits .............................................................................136

A. Plan Descriptions ......................................................................................................136

B. Funding Policy, Funding Status and Funding Progress ......................................138

C. Annual OPEB Cost and Net OPEB Obligation .......................................................139

D. Actuarial Methods and Assumptions .....................................................................140

Note 15. Deferred Compensation .............................................................................................143

Note 16. Risk Management .......................................................................................................144

Note 17. Other Information .......................................................................................................145

A. Elimination Entries ....................................................................................................145

B. Related Party Transactions ......................................................................................145

C. Budgeting, Budgetary Control, and Legal Compliance........................................146

D. Significant Transactions with Component Units ..................................................147

54


E. Individual Fund Deficits ............................................................................................148

F. Restatements – Net Position ....................................................................................148

G. Pledged Revenue ......................................................................................................149

H. Special Items .............................................................................................................150

Note 18. Subsequent Events ....................................................................................................150

Note 19. Restatement of Components of Net Position ........................................................152

55


Note 1. Summary of Significant Accounting Policies

A. Basis of Presentation

The accompanying basic financial statements of the State of Rhode Island and Providence Plantations (the State) and its component units have been prepared in conformance with generally accepted accounting principles (GAAP) for governments as prescribed by the Governmental Accounting Standards Board (GASB). GASB is the accepted standard setting body for establishing governmental accounting and financial reporting principles.

B. Reporting Entity

The accompanying financial statements include all funds of the State and its component units. GASB defines component units as legally separate organizations for which the elected officials of the primary government (such as the State) are financially accountable. In addition, component units can be other organizations for which the nature and significance of their relationship with the State are such that exclusion from the State’s financial statements would cause the statements to be misleading.

GASB has set forth criteria to be considered in determining financial accountability. The primary government (the State) is financially accountable if it appoints a voting majority of the entity’s governing body and (1) it is able to impose its will on that entity or (2) there is a potential for the entity to provide specific financial benefits to, or to impose specific financial burdens on, the State. Also, the State is financially accountable if an entity is fiscally dependent on the State and there is the potential for the entity to provide specific financial benefits to, or to impose specific financial burdens on, the State, regardless of the State’s appointment power over the governing body.

In accordance with GAAP, entities such as local school districts, charter schools, and other local authorities that may only partially meet the criteria for inclusion in this report have not been included. The State’s financial support for the public education system is reported in the General Fund.

Blended Component Units

A component unit is reported as part of the primary government and blended into the appropriate funds in any of the following circumstances:

• The component unit provides services entirely or almost entirely to the primary government, or otherwise exclusively, or almost exclusively, benefits the primary government even though it does not provide services directly to it; or

• The component unit’s governing body is substantively the same as the governing body of the primary government and (a) there is a financial benefit or burden relationship between the primary government and the component unit, or (b) management of the primary government has operational responsibility for the component unit; or

• The component unit’s total debt outstanding is expected to be repaid entirely or almost entirely with resources of the primary government.

For each blended component unit the potential exists for a financial burden or benefit to be imposed on the State as a result of the existence of the component unit. Also, for the blended component units included in the State’s CAFR, the State, generally acting through the Governor, appoints a voting majority of the component units’ governing boards.

The following component units are reported as part of the primary government in both the fund and government-wide financial statements.

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Rhode Island Convention Center Authority (RICCA)

The RICCA was established by State law as a single purpose building authority to finance the development of convention and other event facilities in Providence, RI. RICCA is responsible for the management and operations of the R.I. Convention Center, Dunkin’ Donuts Center and the Veterans Memorial Auditorium Arts and Cultural Center located in Providence. RICCA is dependent upon annual State appropriations of lease revenue by the General Assembly to fund debt service on its outstanding bonds; therefore RICCA’s total debt outstanding, including leases, is expected to be repaid entirely with the resources of the State. For more detailed information, a copy of the financial statements can be obtained by writing to the R.I. Convention Center Authority, One LaSalle Square, Providence, RI 02903 or at www.riconvention.com.

Tobacco Settlement Financing Corporation (TSFC)

TSFC was organized in June 2002 as a public corporation by the State. TSFC is legally separate and provides services exclusively to the State through the purchase of its future tobacco settlement revenues. TSFC is authorized to issue bonds necessary to provide sufficient funds for carrying out its purpose.

The Corporation recognizes receivables and revenue with respect to Tobacco Settlement Revenues (TSRs) based on the domestic shipment of cigarettes. The Corporation accrues at June 30th for TSRs that are derived from estimated sales of cigarettes from January 1 to June 30. This accrual is estimated based upon the historical TSR payments for the prior three fiscal years.

The GASB issued Statement No. 48, Sales and Pledges of Receivables and Future Revenues and Intra-Entity Transfers of Assets and Future Revenues (the Statement), effective for financial statement periods beginning on or after December 15, 2006. The Statement required restatement of prior period financial statements, except for the deferral requirements relative to sales of future revenues which were permitted to be applied prospectively.

As allowed under GASB Statement No. 48, the Corporation and the State elected to not retroactively apply the deferral requirements to its 2002 and 2007 TSR sales completed prior to the effective date. In accordance with accounting standards in effect at the time of the 2002 and 2007 TSR sales, the State fully recognized the amount received for its sale of future TSRs to the TSFC as revenue in those years.

For more detailed information, a copy of the financial statements can be obtained by writing to the Tobacco Settlement Financing Corporation, One Capitol Hill, Providence, RI 02908.

Rhode Island Public Rail Corporation (RIPRC)

This corporation was created and established for the purpose of enhancing and preserving the viability of commuter rail operations in the State. Currently its primary purpose, as outlined in the State’s General Laws, is to provide indemnity for rail service operating within the State. The State is fully responsible for reimbursing RIPRC for all costs associated with the purchase of such insurance coverage. RIPRC provides services exclusively to the State. Separately issued financial statements are not available for RIPRC.

Discretely Presented Component Units

Discretely presented component units are reported in a separate column in the government-wide financial statements to emphasize that they are legally separate from the primary government. They are financially accountable to the primary government, or have relationships with the primary government such that exclusion would cause the reporting entity's financial statements to be misleading.

For each discretely presented component unit the potential exists for a financial burden or benefit to be imposed on the State as a result of the existence of the component unit. For the discretely presented component units included in the State’s CAFR, the State, generally acting through the Governor, appoints a voting majority of the component units’ governing boards. These discretely presented component units primarily serve or benefit those outside of the primary government.

The State distinguishes between major and nonmajor component units based upon the nature and significance of the component unit’s relationship to the State. The factors underlying this determination include the type and dollar value of services provided to the citizens of the State, the presence of significant

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transactions with the State, and a significant benefit or burden relationship with the State. Discretely presented component units, grouped by major and nonmajor categories, are as follows:

Major Component Units

Rhode Island Airport Corporation (RIAC)

This corporation was created in 1992 and its purpose is to undertake the management, operation, maintenance and improvements of the six airports in the State. Revenues of RIAC include airline and concession contract revenues, federal grants, licenses, and permits. RIAC leases the land on which the State’s largest airport is located from the State and reimburses the State annually for general obligation proceeds utilized for certain airport projects. For more detailed information, a copy of the financial statements can be obtained by writing to the Chief Financial Officer, Rhode Island Airport Corporation, 2000 Post Road, Warwick, RI 02886 or at www.pvdairport.com.

Rhode Island Commerce Corporation (RICC)

This corporation was created in 1995 and its purpose is to promote and encourage the preservation, expansion, and sound development of new and existing industry, business, commerce, agriculture, tourism, and recreational facilities in the State, so as to promote economic development. RICC has the power to issue tax-exempt bonds to accomplish its corporate purpose. Until June 30, 2013 the corporation was known as the R.I. Economic Development Corporation. RICC has one component unit, the Small Business Loan Fund Corporation, which was created for the purpose of granting secured and unsecured loans to Rhode Island’s small business community. RICC’s activities are largely supported by State appropriations and RICC has used its debt issuance authority to finance various economic development initiatives on behalf of the State. For more detailed information, a copy of the financial statements can be obtained by writing to the Director of Finance and Administration, R.I. Commerce Corporation, 315 Iron Horse Way, Suite 101, Providence, RI 02903, or at www.commerceri.com.

I-195 Redevelopment District Commission (I-195 RDC)

This commission was created in 2011 by the Rhode Island General Assembly, to oversee, plan, implement, and administer the development of land reclaimed from the Interstate 195 relocation project and the Washington Bridge project. The I-195 RDC issued debt and utilized the proceeds to reimburse the State for the fair value of the land acquired. The State appropriates amounts to the I-195 RDC for debt service and operating assistance until sufficient land sale proceeds are available to fund these expenses. For more detailed information, a copy of the financial statements can be obtained by writing to the Director of Finance and Administration, R. I. Commerce Corporation, 315 Iron Horse Way, Suite 101, Providence, RI 02903, or at www.195district.com.

Rhode Island Public Transit Authority (RIPTA)

This authority was established in 1964 to acquire any mass motor bus transportation system that has filed a petition to discontinue its service, provided that the Authority has determined it to be in the public interest to continue such service. Revenues of RIPTA include passenger revenue, a portion of the tax on gasoline and operating assistance grants from the State and federal governments. In addition to significant operating assistance, the State has also forgiven certain debt service obligations owed to the State as a means to provide additional financial assistance to the Authority. For more detailed information, a copy of the financial statements can be obtained by writing to the Finance Department, R.I. Public Transit Authority, 265 Melrose Street, Providence, RI 02907, or at www.ripta.com.

Rhode Island Turnpike and Bridge Authority (RITBA)

This authority was created by the General Assembly as a body corporate and politic, with powers to construct, acquire, maintain and operate bridge projects as defined by law. RITBA is responsible for the maintenance and operation of the Claiborne Pell, Mount Hope, Jamestown, and Sakonnet River Bridges which are a vital segment of the State’s infrastructure. Title relating to the Jamestown and Sakonnet River bridges has remained with the State, thus those capital assets are reported within the primary government on the State’s government-wide financial statements. The Claiborne Pell and Mount Hope bridges are reported as capital

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assets of RITBA. For more detailed information, a copy of the financial statements can be obtained by writing to the Executive Director, R.I. Turnpike and Bridge Authority, P.O. Box 437, Jamestown, RI 02835-0437, or at www.ritba.org.

University and Colleges

The Board of Education has oversight responsibility for the University of Rhode Island, Rhode Island College and the Community College of Rhode Island. The university and colleges are funded through State appropriations, tuition, federal grants, and private donations and grants. For more detailed information, a copy of the financial statements can be obtained by writing to Office of the Controller, University of Rhode Island, 75 Lower College Road, Kingston, RI 02881; Office of the Controller, Rhode Island College, 600 Mount Pleasant Avenue, Providence, RI 02908; and Office of the Controller, Community College of Rhode Island, 400 East Avenue, Warwick, RI 02886-1805. The financial statements can also be viewed at www.riopc.edu.

Nonmajor Component Units

Central Falls School District

The Central Falls School District (the District) is governed by a seven member board of trustees that is appointed by the State’s Board of Education (Board). As a result of the enactment of Chapter 312 of Rhode Island Public Laws of 1991, the State assumed responsibility for the administration and operational funding of the District effective July 1, 1991. In June 2002, Chapter 16-2 of the Rhode Island General Laws established the board of trustees to govern the District in a manner consistent with most local school committees. In addition, the Commissioner of Elementary and Secondary Education and the Board have oversight over the development and approval of the District’s operating budget and for other significant operating decisions and contracts. The District, which provides elementary and secondary education to residents of the City of Central Falls, is funded primarily through State appropriations and federal grant funds. For more detailed information, a copy of the financial statements can be obtained by writing to the Central Falls School District, 949 Dexter Street – Lower Level, Central Falls, RI 02863-1715.

Division of Higher Education Assistance (DHEA)

DHEA was established on July 1, 2015 by an Act of the Rhode Island General Assembly for the dual purpose of guaranteeing loans to students in eligible institutions and administering other programs of post-secondary student financial assistance assigned by law to the Division. For more detailed information, a copy of the financial statements can be obtained by writing to the Chief Financial Officer, Office of Postsecondary Commissioner, Division of Higher Education Assistance, 560 Jefferson Boulevard, Warwick, RI 02886, or at www.riopc.edu.

Rhode Island Housing and Mortgage Finance Corporation (RIHMFC)

This corporation, established in 1973, was created in order to expand the supply of housing available to persons of low and moderate income and to stimulate the construction and rehabilitation of housing and health care facilities in the State. It has the power to issue notes and bonds to achieve its corporate purpose. Certain debt issued by RIHMFC is secured in part by capital reserve funds. The General Assembly may, but is not required to, appropriate funding of any deficiencies in such reserves. For more detailed information, a copy of the financial statements can be obtained by writing to the Chief Financial Officer, R.I. Housing and Mortgage Finance Corporation, 44 Washington Street, Providence, RI 02903-1721, or at www.rhodeislandhousing.org.

Rhode Island Industrial Facilities Corporation (RIIFC)

The purpose of this corporation is to issue revenue bonds, construction loan notes and equipment acquisition notes for the financing of projects which further industrial development in the State. All bonds and notes issued by RIIFC are payable solely from the revenues derived from leasing or sale by RIIFC of its projects. The bonds and notes do not constitute a debt or pledge of the faith and credit of RIIFC or the State and, accordingly, have not been reported in the accompanying financial statements. Certain obligations of RIIFC are secured by mortgages which are insured by the Rhode Island Industrial-Recreational Building Authority for which the State’s full faith and credit is pledged. For more detailed information, a copy of the financial statements can

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be obtained by writing to the Director of Finance and Administration, R.I. Industrial Facilities Corporation, 315 Iron Horse Way, Suite 101, Providence, RI 02903, or at www.commerceri.com.

Rhode Island Industrial-Recreational Building Authority (RIIRBA)

This authority is authorized to insure first mortgages and first security agreements granted by financial institutions and the Rhode Island Industrial Facilities Corporation for companies conducting business in the State. RIIRBA’s insurance of first mortgages and first security agreements is backed by a pledge of the full faith and credit of the State. For more detailed information, a copy of the financial statements can be obtained by writing to the Director of Finance and Administration, R.I. Industrial-Recreational Building Authority, 315 Iron Horse Way, Suite 101, Providence, RI 02903, or at www.commerceri.com.

Rhode Island Resource Recovery Corporation (RIRRC)

This corporation was established in 1974 in order to provide and/or coordinate solid waste management services to municipalities and persons within the State. RIRRC has the power to issue negotiable bonds and notes to achieve its corporate purpose. RIRRC coordinates and administers a statewide recycling program and has periodically transferred amounts to the State’s general fund as operating assistance. The State is one of several potentially responsible parties for the costs of remedial actions at RIRRC’s superfund site. For more detailed information, a copy of the financial statements can be obtained by writing to R.I. Resource Recovery Corporation, 65 Shun Pike, Johnston, RI 02919, or at www.rirrc.org.

Quonset Development Corporation (QDC)

This corporation was established in 2004 as a real estate development and management company for the Quonset Point/Davisville Industrial Park. Its purpose is to promote the preservation, expansion, and development of new and existing industry and business, in order to stimulate and support diverse employment opportunities in the State. The State has provided funding for certain capital improvements required at the industrial park to aid in its expansion and development. For more detailed information, a copy of the financial statements can be obtained by writing to the Finance Director, Quonset Development Corporation, 95 Cripe Street, North Kingstown, RI 02852 or at www.quonset.com.

The Metropolitan Regional Career and Technical Center

The Metropolitan Regional Career and Technical Center (The Met) is a state funded, local education agency established by the R.I. Department of Education under the Rhode Island General Laws. The Met serves approximately 900 students statewide in grades 9-12. It is governed by a board of trustees that is appointed by the State’s Board of Education. The Met is funded primarily through State appropriations and federal grant funds. In addition, it conducts its operations in facilities that are owned by the State. For more detailed information, a copy of the financial statements can be obtained by writing to the Chief Financial Officer, The Metropolitan Regional Career and Technical Center, 325 Public Street, Providence, RI 02905.

Rhode Island Infrastructure Bank (RIIB)

This agency was established in 1991 as the R.I. Clean Water Finance Agency for the purpose of providing financial assistance in the form of loans to municipalities, sewer commissions and waste water management districts in the State for the construction or upgrading of water pollution abatement projects. RIIB receives capital grants from the State and federal governments and is authorized to issue revenue bonds and notes. In conjunction with the creation of the Municipal Road and Bridge Revolving Fund (MRBRF) which was established to provide municipalities with low-cost financial assistance for road and bridge projects the name of the Rhode Island Clean Water Finance Agency was changed to the Rhode Island Infrastructure Bank. RIIB manages the MRBRF on behalf of the State. Therefore, it was determined to be a discretely presented component unit. For more detailed information, a copy of the financial statements can be obtained by writing to the R.I. Infrastructure Bank, 235 Promenade Street, Suite 119, Providence, RI 02908 or at www.riinfrastructurebank.com.

Rhode Island Health and Educational Building Corporation (RIHEBC)

RIHEBC has two purposes 1) to aid eligible institutions in the educational and healthcare fields in Rhode Island gain access to capital, remain proactive in developing cost-effective programs, offer staff assistance,

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and provide technical resources that benefit these institutions and 2) administer the School Building Authority Capital Fund (SBACF) in order to address high priority projects in communities with limited financial resources. RIHEBC has administrative duties related to the management and custody of monetary assets of the SBACF, including establishing a trust to hold related monies, creating and maintaining SBACF’s accounting records and the distribution and management of SBACF’s award and loan programs. RIHEBC was determined to be a discretely presented component unit due the materiality of the SBACF. For more detailed information, a copy of the financial statements can be obtained by writing to the Chief Financial Officer, Rhode Island Health and Educational Building Corporation, 50 Dorrance Street, Suite 300, Providence, RI 02903 or at http://rihebc.com/financial-info/financial-statements/.

Related Organizations

The Rhode Island Student Loan Authority and Narragansett Bay Commission are “related organizations” of the State under GAAP as defined by GASB. The State is responsible for appointing a voting majority of the members of each entity’s board, however, the State’s accountability does not extend beyond the appointments. These entities do not meet the criteria for inclusion as component units of the State and therefore are not included in these financial statements.

C. Financial Statement Presentation

Government-wide Financial Statements

The government-wide financial statements (i.e., the Statement of Net Position and the Statement of Activities) report information on all nonfiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable.

The Statement of Net Position presents the reporting entity's nonfiduciary assets, deferred outflows of resources, liabilities, and deferred inflows of resources, with the difference reported as net position. The net position is reported in three categories:

Net investment in capital assets – This category reflects the portion of net position associated with capital assets, net of accumulated depreciation and the amount of outstanding bonds and other debt attributable to the acquisition, construction or improvement of those assets.

Restricted – This category represents the portion of net position whose use is subject to constraints that are either a) imposed externally by creditors, grantors or contributors, or b) imposed by law through constitutional provisions or enabling legislation.

Unrestricted – This category represents the portion of net position that does not meet the definition of the two preceding categories. The use of the unrestricted net position is often subject to constraints imposed by management, but such constraints can be removed or modified.

The Statement of Activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are specifically associated with a service, program, or department and, thus, are clearly identifiable to a particular function. The State includes certain centralized services charged through internal service funds as direct expenses by charging these amounts directly to departments and programs. The State does not allocate indirect costs amongst the functional expenditure categories.

Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Taxes and other items not properly included among program revenues are reported instead as general revenues.

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Fund Financial Statements

Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and enterprise funds are reported as separate columns in the fund financial statements, with nonmajor funds being combined into a single column.

The State reports the following fund types:

Governmental Fund Types

Special Revenue Funds - These funds account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes and where a separate fund is legally mandated.

Capital Projects Funds - These funds reflect transactions related to resources received and used for the acquisition, construction, or improvement of capital facilities of the State and its component units.

Debt Service Funds - These funds are used to account for and report financial resources that are restricted, committed, or assigned to expenditure for principal and interest. Debt service funds are used to report resources if legally mandated or when financial resources are being accumulated for principal and interest maturing in future years.

Permanent Fund - The Permanent School Fund accounts for certain resources and the earnings thereon, which are used for the promotion and support of public education.

Proprietary Fund Types

Internal Service Funds - These funds account for, among other things, employee medical benefits, State fleet management, unemployment and workers' compensation for State employees, prison industry operations, surplus property, telecommunications and other utilities, and records maintenance.

Enterprise Funds - These funds may be used to report any activity for which a fee is charged to external users for goods and services.

Fiduciary Fund Types

Pension and Other Employee Benefit Trust Funds

Pension Trust Funds - These funds account for the activities of the Employees' Retirement System, Municipal Employees' Retirement System, State Police Retirement Benefit Trust, Judicial Retirement Benefit Trust, Rhode Island Judicial Retirement Fund Trust, Teachers’ Survivors Benefit Plan, FICA Alternative Retirement Income Security Program, and the defined contribution retirement plan, which all accumulate resources for pension benefit payments to eligible retirees.

Other Employee Benefit Trust Funds - These funds account for the activities of the Rhode Island State Employees’ and Electing Teachers OPEB System, which accumulates resources to provide post-employment health care benefits to eligible retirees.

Investment Trust Fund - This fund accounts for the share of the Ocean State Investment Pool that is owned by participants external to the reporting entity.

Private Purpose Trust Funds

The Rhode Island Higher Education Savings Trust (RIHEST) administers the CollegeBoundfund which was established as part of the Rhode Island Tuition Savings Program (Program) to enable residents of any state to save money on a tax-advantaged basis, to pay qualified higher education expenses of their designated beneficiaries. All assets of the Program are held for the benefit of Program participants.

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The Touro Jewish Synagogue Fund accounts for the earnings on monies bequeathed to the State for the purpose of maintaining the Touro Jewish Synagogue.

Agency Funds - These funds account for assets held by the State pending distribution to others, assets pledged to the State as required by statute, and health insurance for certain employees and retirees of a component unit.

In accordance with GAAP for government as prescribed by the GASB, the focus in the fund financial statements is on major and nonmajor funds rather than on fund type. The general fund is a major fund. Other governmental funds and enterprise funds are evaluated on these criteria:

• Total assets and deferred outflows, liabilities and deferred inflows, resources/revenues, or expenditures/expenses of that fund are at least 10% of the respective total for all funds of that type, and

• Total assets and deferred outflows, liabilities and deferred inflows, resources/revenues, or expenditures/expenses of that fund are at least 5% of the same respective total for all funds being evaluated.

Major Funds

Governmental funds:

General Fund

This is the State's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund.

Intermodal Surface Transportation Fund

This fund accounts for the collection of the gasoline tax, federal grants, bond proceeds, Rhode Island Capital Plan funds, and certain motor vehicle registration and licensing surcharges, that are used in maintenance, upgrading, and construction of the State's highway system. It also accounts for the proceeds from the Grant Anticipation Revenue Vehicle (GARVEE) bonds, the RI Motor Fuel Tax (RIMFT) revenue bonds, the I-195 Redevelopment District Commission bonds, the Mission 360 Loan Program and related expenditures. Management considers this a major fund regardless of the above criteria.

Proprietary funds:

Rhode Island Lottery

The R.I. Lottery, a division of the Department of Revenue, operates games of chance for the purpose of generating resources for the State's General Fund. For more detailed information, a copy of the financial statements can be obtained by writing to the Rhode Island Lottery, 1425 Pontiac Avenue, Cranston, RI 02920, or at www.rilot.com.

Rhode Island Convention Center Authority (RICCA)

The RICCA was established by State law as a single purpose building authority to finance the development of convention and other event facilities in Providence, RI. RICCA is responsible for the management and operations of the R.I. Convention Center, Dunkin’ Donuts Center and the Veterans Memorial Auditorium Arts and Cultural Center located in Providence.

Employment Security Fund

This fund accounts for the State's unemployment compensation program. Revenues consist of taxes assessed on employers to pay benefits to qualified unemployed persons. Funds are also provided by the federal government and interest income. Management considers this a major fund regardless of the above criteria.

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D. Measurement Focus and Basis of Accounting

The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Taxes, grants and donations are nonexchange transactions, in which the State receives value without directly giving equal value in exchange. Tax revenue is recognized in the fiscal year in which the related sales, wages, or activity being taxed occurred.

Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.

Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues and related receivables are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period (i.e., earned and collected within the next 12 months) or soon enough thereafter to pay liabilities of the current period. Significant sources of tax revenues susceptible to accrual are recorded as taxpayers earn income (personal income and business corporation taxes), as sales are made (sales and use taxes) and as other taxable events occur (miscellaneous taxes), net of estimated tax refunds. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, expenditures for principal and interest on long-term debt and compensated absences are recorded when payments come due. Expenditures and liabilities relating to other claims and judgments are recorded to the extent that such amounts are expected to be paid within the current period.

Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the enterprise and internal service funds are charges to customers for sales and services. Operating expenses for enterprise and internal service funds include the cost of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting these definitions are reported as nonoperating revenues and expenses.

The State’s enacted budget designates the source of funds for expenditures. When a type of expenditure is allocable to multiple funding sources, generally the State uses restricted resources first, then unrestricted resources as they are needed.

E. Cash and Cash Equivalents

Cash represents amounts in demand deposit accounts with financial institutions. Cash equivalents are highly liquid investments with a maturity of three months or less at the time of purchase. Cash equivalents are stated at cost, which approximates fair value except for those of the Ocean State Investment Pool and other money market mutual funds which are stated at amortized cost, which approximates fair value.

Except for certain internal service funds, the State does not pool its cash deposits. For those internal service funds that pool cash, each fund reports its share of the cash on the Statement of Net Position.

F. Funds on Deposit with Fiscal Agent

Funds on deposit with fiscal agent in the governmental activities and business-type activities represent the unexpended portion of debt instruments sold primarily for capital acquisitions and historic tax credit financing, as well as funds held by the United States Treasury for the payment of unemployment benefits.

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G. Investments

Investments have a maturity of more than three months and are generally stated at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

H. Receivables

Receivables are stated net of estimated allowances for uncollectible amounts, which are determined based upon past collection experience. Within governmental funds, an allowance for unavailable amounts (amounts not expected to be collected in the next twelve months) is also reflected.

I. Due From Other Governments and Agencies

Due from other governments and agencies is primarily comprised of amounts due from the federal government for reimbursement-type grant programs.

J. Interfund Activity

In general, eliminations have been made to minimize the double counting of internal activity, including internal service fund type activity, on the government-wide financial statements. However, in order to avoid distorting the direct costs and program revenues of the applicable functions, interfund services provided and used between different functional categories have not been eliminated.

The Due From/To Other Funds are reported at the net amount on the fund financial statements. Transfers between governmental and business-type activities are reported at the net amount on the government-wide financial statements.

In the fund financial statements, transactions for services rendered by one fund to another are treated as revenues of the recipient fund and expenditures/expenses of the disbursing fund. Reimbursements of expenditures/expenses made by one fund for another are recorded as expenditures/expenses in the reimbursing fund and as a reduction of expenditures/expenses in the reimbursed fund. Transfers represent flows of assets between funds of the primary government without equivalent flows of assets in return and without a requirement for payment.

K. Inventories Inventory type items acquired by governmental funds are accounted for as expenditures at the time of purchase. Inventories of the proprietary funds are stated at cost (first-in, first-out). Inventories of the University and Colleges are stated at the lower of cost (first-in, first-out and retail inventory method) or market, and consist primarily of bookstore and dining, health and residential life services items. Inventories of all other component units are stated at cost.

L. Capital Assets

Capital assets, which include land, intangible assets not being amortized, construction in progress, land improvements, buildings, building improvements, furniture and equipment (which also includes subcategories for vehicles and computer systems), depreciable intangibles (computer software), and infrastructure (e.g., roads, bridges, dams, piers) are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are recorded at historical cost or estimated historical cost. Donated capital assets are recorded at estimated fair value at the date of donation. Intangible assets not being amortized consist mostly of perpetual land rights such as conservation, recreational, and agricultural easements.

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Applicable capital assets are depreciated or amortized using the straight-line method (using a half-year convention). Capitalization thresholds and estimated useful lives for depreciable capital asset categories of the primary government are as follows:

The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Interest incurred during the construction of capital facilities is not capitalized, with the exception of the Convention Center Authority, an enterprise fund.

Capital assets acquired in the governmental funds are recorded as capital outlay expenditures in capital projects funds and current expenditures by function in other governmental fund financial statements. Depreciation and amortization are recorded in the government-wide financial statements, proprietary funds, fiduciary funds and component unit financial statements. Capital assets of the primary government are depreciated using the straight-line method over the assets’ estimated useful life.

The State has recorded its investment in intangible assets, which includes certain land rights such as conservation and agricultural easements as well as certain rights of way obtained by the State. These easements tend to be of a perpetual nature and thus are not amortized. Intangible assets also include computer software, which is amortized over a 5-year period. The State has included its investment in intangible assets within Note 5, Capital Assets.

Discretely presented component units have adopted estimated useful lives for their capital assets as well as capitalization thresholds. These entities depreciate capital assets using the straight-line method.

M. Bonds Payable

In the Statement of Revenues, Expenditures, and Changes in Fund Balances-Governmental Funds, bond discounts, premiums, and issuance costs are recognized in the current period. In the government-wide financial statements bond discounts, premiums, and deferred gains and losses on refundings are deferred and amortized over the term of the bonds using the outstanding principal method.

For proprietary fund types and component units, bond discounts, premiums and deferred gains and losses on refundings are generally deferred and amortized over the term of the bonds using the interest method. Bond premiums and discounts are presented as adjustments to the face amount of the bonds payable. Deferred gains and losses on refundings are presented as either deferred inflows of resources or deferred outflows of resources.

N. Obligations Under Capital Leases

The construction and acquisition of certain office buildings, campus facilities and other public facilities, as well as certain equipment acquisitions, have been financed through bonds and notes issued by a trustee pursuant to a lease/purchase agreement with the State or similar financing arrangements (See Note 6E).

CapitalizationThresholds Estimated Useful Lives

Capital Assets (Depreciable)Land improvements $1 million 20 yearsBuildings $1 million 20 - 50 yearsBuilding Improvements $1 million 10 - 20 yearsFurniture and equipment $5 thousand 3 - 10 yearsIntangibles $1 million 5 yearsInfrastructure $1 million 7 - 75 years

Asset Category

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O. Pensions

For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Employees’ Retirement System (ERS) cost-sharing plan and the single–employer plans administered by the Employees’ Retirement System of Rhode Island (System) and the additions to and deductions from the plans’ fiduciary net position have been recognized on the same basis as they are reported by the System. The primary government’s proportionate share of pension amounts were further allocated to proprietary funds (the Lottery) based on the amount of employer contributions paid by each proprietary fund. For this purpose, benefit payments, (including refunds of employee contributions) are recognized when due and payable and in accordance with the benefit terms. Investments are recorded at fair value.

As more fully explained in Note 13, a special funding situation exists with respect to local teachers for which the State funds 40% of actuarially determined contributions to the ERS plan. Accordingly, the financial statements reflect the State’s proportionate share of the net pension liability, pension expense and deferred inflows/outflows related to this special funding situation.

For the State’s two non-contributory (pay-as-you-go) plans covering certain judges and state police, the provisions of GASB Statement No. 73 have been implemented which is largely consistent with the provisions of GASB Statement No. 68, regarding recognition of the pension liability, pension expense and deferred inflows/outflows except there is no fiduciary net position accumulated to offset the total pension liability and no employer contributions are made other than the amount needed to provide benefits on a pay-as you-go basis.

For certain employees participating in the LIUNA defined benefit pension plan (a non-governmental union sponsored plan), there is no required employer contribution and no pension expense is recorded in the financial statements. Consistent with the provisions of GASB Statement No. 78, which provides an exception for non-governmental sponsored plans, no determination of the proportionate net pension liability, pension expense, or deferred inflows or outflows, if any, is made for this cost-sharing defined benefit pension plan.

P. Compensated Absences

Vacation pay may be discharged, subject to limitations as to carry-over from year to year, by future paid leave or by cash payment upon termination of service. Sick pay may be discharged by payment for an employee's future absence caused by illness or, to the extent of vested rights, by cash payment upon death or retirement. Also, an additional category of leave obligation has been established as a result of pay reductions taken by certain classes of employees. For governmental fund types, such obligations are recognized when paid. For the government-wide financial statements and proprietary fund types, they are recorded as liabilities when earned.

Q. Other Assets and Liabilities

Other assets reported within the primary government mainly consist of deposits required by contract with the State’s healthcare claims administrator. Other liabilities include 1) escrow deposits, accrued salary and fringe benefits for the governmental fund types; 2) accrued interest payable, accrued salaries, accrued vacation and sick leave for the proprietary fund types; and 3) escrow deposits, landfill closure costs, accrued expenses, and arbitrage and interest payable for the component units.

R. Deferred Outflows of Resources and Deferred Inflows of Resources

Deferred outflows of resources represent a consumption of net position by the State that is applicable to a future reporting period. Deferred inflows of resources represent an acquisition of net position by the State that is applicable to a future reporting period. Deferred outflows of resources increase net position, similar to assets, and deferred inflows of resources decrease net position, similar to liabilities.

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The components of the deferred outflows of resources and deferred inflows of resources related to the primary government and its discretely presented component units as of June 30, 2016 are as follows (expressed in thousands):

The components of the deferred inflows of resources related to the governmental funds as of June 30, 2016 are as follows (expressed in thousands):

S. Fund Balances

In the fund financial statements, governmental funds report fund balance as nonspendable, restricted, committed, assigned or unassigned based primarily on the extent to which the State is bound to honor constraints on how specific amounts can be spent. More information about each category is presented below:

• Nonspendable – amounts that cannot be spent because they are either (a) not spendable in form or (b) legally or contractually required to be maintained intact.

• Restricted – amounts with constraints placed on their use that are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments; or (b) imposed by constitutional provisions, or (c) by law through enabling legislation enacted by the General Assembly.

• Committed – amounts that can only be used for specific purposes as established through the enactment of legislation by the General Assembly, and that remain binding unless modified or rescinded through subsequent legislative action. The underlying action that imposed the limitation must occur no later than the close of the fiscal year and must be binding unless repealed by the General Assembly.

• Assigned – amounts that are constrained by the State’s intent that they be used for specific purposes. The intent is generally established by legislation enacted by the General Assembly and is implemented at the direction of the Governor.

Deferred outf low s of resources:Deferred loss on refunding of debt $ 77,642 $ 4,831 $ 82,473 $ 9,309Deferred pension costs - ERS 232,694 1,399 234,093 21,871Deferred pension costs - single employer

plans and other 30,521 30,521 20,200Derivatives 2,902

Total deferred outf low s of resources $ 340,857 $ 6,230 $ 347,087 $ 54,282

Deferred inflow s of resources:Deferred pension credit - ERS $ 75,928 $ 300 $ 76,228 $ 6,993Deferred pension credit - single employer

plans and other 6,363 6,363 3,953Deferred gain on refunding of debt 32,909 32,909 1,134

Total deferred inflow s of resources $ 115,200 $ 300 $ 115,500 $ 12,080

Business-

Activities GovernmentPrimary Component

UnitsGovernmental Type

Activities

Deferred inflows of resources:Taxes $ 6,019 $ $ 6,019Other general revenue 7,143 7,143Federal revenue 8,358 8,462 16,820

Total deferred inflows of resources $ 21,520 $ 8,462 $ 29,982

TotalGeneral IST Governmental

Fund Fund Funds

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• Unassigned – the residual classification for the State’s General Fund that includes amounts not contained in the other classifications. In other funds, the unassigned classification is used only if expenditures incurred for specific purposes exceed the amounts restricted, committed, or assigned to those purposes.

When both restricted and unrestricted resources are available for use, it is the State’s policy to use restricted resources first, followed by unrestricted resources. Unrestricted resources, when available for a particular use, are used in the following order: committed, assigned, and unassigned.

T. Recently Issued Accounting Standards

During the fiscal year ended June 30, 2016, the State adopted the following new accounting standards issued by GASB:

• GASB Statement No. 72, Fair Value Measurement and Application

• GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments

• GASB Statement No. 79, Certain External Investment Pools and Pool Participants

The implementation of GASB Statement No. 72 required the State to address certain accounting and financial reporting issues related to fair value measurements. The definition of fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. GASB Statement No. 72 provided guidance for determining a fair value measurement for financial reporting purposes, and for applying fair value to certain investments and disclosures related to all fair value measurements.

The implementation of GASB Statement No. 79 required additional note disclosures for qualifying external investment pools that measure all of their investments at amortized cost for financial reporting purposes, and for governments that participate in those pools, which includes the State of Rhode Island. Those disclosures for both the qualifying external investment pools and their participants include information about any limitations or restrictions on participant withdrawals.

The State will adopt the following new accounting pronouncements in future years:

GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, will be effective for financial statements for periods beginning after June 15, 2017. The primary objective of this statement is to improve accounting and financial reporting by state and local governments for postemployment benefits other than pensions (other postemployment benefits or OPEB). It also improves information provided by state and local governmental employers about financial support for OPEB that is provided by other entities. This statement results from a comprehensive review of the effectiveness of existing standards of accounting and financial reporting for all postemployment benefits (pensions and OPEB) with regard to providing decision-useful information, supporting assessments of accountability and inter-period equity, and creating additional transparency.

GASB Statement No. 77, Tax Abatement Disclosures, will be effective for financial statements for periods beginning after December 15, 2015. This statement requires disclosure of tax abatement information about a reporting government’s own tax abatement agreements and those that are entered into by other governments, which reduce the reporting government’s tax revenues. The purpose of the disclosures are to better allow users to understand how tax abatements affect a government’s future ability to raise resources and meet its financial obligations, and the impact those abatements have on a government’s financial position and economic condition.

GASB Statement No. 80, Blending Requirements for Certain Component Units—An Amendment of GASB Statement No. 14, will be effective for periods beginning after June 15, 2016. This Statement amends the blending requirements for the financial statement presentation of component units of all state and local

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governments. The additional criterion requires blending of a component unit incorporated as a not-for-profit corporation in which the primary government is the sole corporate member.

GASB Statement No. 81, Irrevocable Split-Interest Agreements, will be effective for periods beginning after December 15, 2016. The objective of this Statement is to improve accounting and financial reporting for irrevocable split-interest agreements by providing recognition and measurement guidance for situations in which a government is a beneficiary of the agreement.

GASB Statement No. 82, Pension Issues—An Amendment of GASB Statements No. 67, No. 68, and No. 73, will be effective for reporting periods beginning after June 15, 2016. This Statement addresses issues regarding (1) the presentation of payroll-related measures in required supplementary information, (2) the selection of assumptions and the treatment of deviations from the guidance in an Actuarial Standard of Practice for financial reporting purposes, and (3) the classification of payments made by employers to satisfy employee (plan member) contribution requirements.

Management has not yet determined the effect that the above GASB statements will have on the financial statements.

U. Changes in Reporting Entity

The Rhode Island Higher Education Savings Trust (the Trust), a private purpose trust, which had a beginning fiduciary net position of $7.4 billion, was previously a fiduciary component unit of the RI Higher Education Assistance Authority, but not included within the State reporting entity. Pursuant to legislation enacted by the General Assembly in the 2015 session, responsibility for oversight of the Trust was transferred to the General Treasurer effective July 1, 2015, and the Trust’s financial statements are now included as a fiduciary (private purpose trust) fund.

The Rhode Island Higher Education Assistance Authority, previously a discretely presented component unit, was dissolved and its operations were assumed by the newly created Division of Higher Education Assistance (the Division) within the Office of the Commissioner of Post-Secondary Education. The State’s fiscal year 2016 financial statements include the Division as a discretely presented component unit. Beginning net position was decreased for the net position of the RI Higher Education Assistance Authority which ceased operations on June 30, 2015. A fiscal 2016 special item reflects the transfer of net position to the new Division.

The classifications of the Rhode Island Infrastructure Bank (RIIB) and the Rhode Island Health and Educational Building Corporation (RIHEBC) were changed from related organizations to discretely presented component units of the State for fiscal year 2016. The change in classification for the RIIB was pursuant to the RIIB’s management of the newly created Municipal Road and Bridge Revolving Fund for the State. The change in classification for RIHEBC was due to its management of the newly created School Building Authority Capital Fund’s program for the State.

Note 2. Cash, Cash Equivalents, Investments, and Funds in Trust A. Primary Government-Governmental and Business-Type Activities

Cash Deposits

Cash deposits include demand deposit accounts, interest-bearing deposit accounts, and certificates of deposit. Deposits are exposed to custodial credit risk if they are not covered by federal depository insurance and the deposits are a) uncollateralized, b) collateralized with securities held by the pledging financial institution, or c) collateralized with securities held by the pledging financial institution’s trust department or agent but not in the State’s name.

In accordance with Chapter 35-10.1 of the General Laws, depository institutions holding deposits of the State, its agencies or governmental subdivisions of the State shall, at a minimum, insure or pledge eligible collateral equal to one hundred percent of time deposits with maturities greater than 60 days. Any of these institutions which do not meet minimum capital standards prescribed by federal regulators shall insure or pledge eligible

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collateral equal to one hundred percent of deposits, regardless of maturity. None of the cash deposits of the primary government were required to be collateralized at June 30, 2016 pursuant to this statutory provision. However, the Office of the General Treasurer has instituted a collateralization requirement for institutions holding the State’s deposits. Financial institutions are required to pledge collateral equal to 102% of the balance of uninsured deposits. Additionally, consistent with State Investment Commission guidelines, certain interest-bearing deposit accounts used as short-term investments are required to be collateralized at 102% of the outstanding balance. The lone exception to the full collateralization requirement is the Ocean State Investment Pool Trust (OSIP or the Trust), which follows the 60 day time deposit rule, but otherwise does not require full collateralization. The investment objective of the OSIP's Cash Portfolio is to seek to obtain as high a level of current income as is generally consistent with the preservation of principal and liquidity within the OSIP's investment guidelines which are consistent with GASB No. 79 – Certain External Investment Pools and Pool Participants. While investment in the pool is not guaranteed or fully collateralized, certain investments within the pool are collateralized. At June 30, 2016, of the $542.0 million invested, $23.4 million were Collateralized Repurchase Agreements.

With the exception of $1.2 million in bank balances of the R.I. Convention Center Authority, as of June 30, 2016 all of the bank balances of the primary government and its blended component units were either covered by federal depository insurance or collateralized by securities held by an independent third party in the State’s or the blended component unit’s name.

Cash Equivalent Investments and Investments

The State Investment Commission (Commission) is responsible for the investment of all State funds. Pursuant to Chapter 35-10 of the General Laws, the Commission may, in general, "invest in securities as would be acquired by prudent persons of discretion and intelligence in these matters who are seeking a reasonable income and the preservation of their capital.”

The Ocean State Investment Pool Cash Portfolio (the Cash Portfolio) is a portfolio of the Ocean State Investment Pool Trust, which is an investment pool established by the General Treasurer of the State of Rhode Island under Declaration of Trust, dated January 25, 2012, under the Rhode Island Local Government Investment Pool Act, G.L. 35-10.2, of the Rhode Island General Laws as amended, for the purpose of investing funds of, and funds under custody of agencies, authorities, commissions, boards, municipalities, political subdivisions, and other public units of the State of Rhode Island. The Cash Portfolio, which began operations on March 6, 2012, is not registered with the Securities and Exchange Commission (SEC) as an investment company, but maintains a policy to operate in a manner consistent with GASB 79 – Certain External Investment Pools and Pool Participants.

OSIP has met the criteria outlined in GASB Statement No. 79 – Certain External Investment Pools and Pool Participants to permit election to report its investments at amortized cost which approximates fair value. The OSIP is not rated and the weighted average maturity of investments held in the pool is not to exceed 60 days. OSIP transacts with its participants at a stable net asset value (“NAV”) per share. Investments reported at NAV are not subject to the fair value hierarchy. There are no participant withdrawal limitations.

A copy of the annual report for the Ocean State Investment Pool can be obtained by writing to the Office of the General Treasurer, 50 Service Avenue, Warwick, RI 02886.

Other short-term cash equivalent type investments are made by the General Treasurer in accordance with guidelines established by the Commission. Investments of certain blended component units are not made at the direction of the Commission, but are governed by specific statutes or policies established by their governing body.

Fair Value of Financial Instruments GASB Statement No. 72—Fair Value Measurement and Application—establishes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available, of how the market would price the asset or liability. The fair value hierarchy is categorized into three levels based on the inputs as follows:

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Level 1 - Unadjusted quoted priced in active markets that are accessible at the measurement date for identical assets or liabilities.

Level 2 - Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability.

Level 3 - Unobservable inputs for the asset or liability (supported by little or no market activity). Level 3 inputs include management's own assumption about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).

The asset's or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques maximize the use of relevant observable inputs and minimize the use of unobservable inputs.

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Following is a description of the State's cash equivalents and investments (expressed in thousands) at June 30, 2016 are as follows:

Of the State’s restricted cash and cash equivalents totaling $54.4 million, $52.2 million is held by the Tobacco Settlement Financing Corporation and $2.2 million is held by the R.I. Convention Center Authority. Both entities are blended component units.

Investments held within the OSIP pooled trust are valued and net asset value per unit (NAV) is calculated daily on the last calendar day of the period. The OSIP pooled trust categorizes the inputs to valuation techniques used to value its investments into a disclosure hierarchy consisting of three levels as described previously. The securities held within the OSIP pooled trust are valued at amortized cost, which approximates fair value. Securities held within the OSIP pooled trust are generally high quality and liquid; however, they are reflected as Level 2 in the hierarchy because the inputs used to determine fair value are not quoted prices in an active market.

Pooled cash equivalents (at amortized cost)Financial company commercial paper $ 314,074Other commercial paper 35,420Asset backed commercial paper 51,620Government agency repurchase agreement 15,417Other repurchase agreements 8,000Certif icates of deposit 77,153Other Municipal Debt 300Other notes 31,000Other Instruments 9,000Total investments 541,984Less: other liabilities in excess of other assets (47)Total investment pool 541,937

Less: funds held by fiduciary funds and discretely presented component unitsAmounts categorized as funds on deposit w ith f iscal agent 2Amounts held by f iduciary trust funds:

Pension trusts 5,426OPEB trust 784RIPTA health fund 36

Amounts held by discretely presented component units:URI 30,205RIIB 13,928RIIRBA 1,716RIHEBC 2,260

Amounts held for external parties 1,869Primary government pooled cash equivalents $ 485,712

Add: other primary government cash equivalents and investmentsRepurchase agreements 4,213Money Market Mutual Funds 55,267

Total primary government cash equivalents and investments $ 545,192

Cash equivalents and investments $ 545,192Cash 539,388Total cash, cash equivalents and investments $ 1,084,580

Statement of Net PositionCash and cash equivalents $ 1,030,104Restricted cash and cash equivalents 54,476Total cash, cash equivalents and investments $ 1,084,580

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Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, the State will not be able to recover deposits or will not be able to recover collateral securities that are in the possession of an outside party. Investment securities are exposed to custodial credit risk if the securities are uninsured, are not registered in the name of the government, and are held by either: a. the counterparty, or b. the counterparty’s trust department or agent but not in the government’s name. Pursuant to guidelines established by the SIC, securities purchased or underlying collateral are required to be delivered to an independent third party custodian for the investments of the primary government.

Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. Based on SIC policy, the State’s short-term investment portfolio is structured to minimize interest rate risk by matching the maturities of investments with the requirements for funds disbursement.

As of June 30, 2016, information about the State’s exposure to interest rate risk for cash equivalents and investments (expressed in thousands) is as follows:

Pooled Cash Equivalents

Non-pooled Cash Equivalents and Investments

All the non-pooled cash equivalents and investments have a maturity date of less than one year.

Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Credit risk is mitigated by the State’s minimum rating criteria policy, collateralization requirements, and the fact that maximum participation by any one issuer is limited to 35% of the total portfolio. Credit risk policies have been developed for investments in commercial paper.

Investment Maturities (in days)

Investment TypeFinancial Company Commercial Paper $ 314,138 $ 314,074 $ 117,649 $ 117,064 $ 79,361 Other Commercial Paper 35,421 35,420 20,431 14,989 Asset Backed Commercial Paper 51,620 51,620 47,232 4,388 Gov't Agency Repurchase Agreements 15,417 15,417 15,417 Other Repurchase Agreements 8,000 8,000 8,000 Certif icates of Deposit 77,153 77,153 77,153 Other Municipal Debt 300 300 300 Other Notes 31,000 31,000 31,000 Other Instruments 9,000 9,000 9,000

$ 542,049 $ 541,984 $ 325,882 $ 136,441 $ 79,661

(At Amortized Cost)At

Fair ValueTotal

Amortized Cost 0-30 31-90 91-180

FairInvestment Type ValueMoney Market Mutual Funds 55,267Repurchase agreements 4,213Cash equivalents and investments $ 59,480

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As of June 30, 2016, information about the State’s exposure to credit risk for cash equivalents and investments (expressed in thousands) is as follows:

Pooled Cash Equivalents

The Ocean State Investment Pool has not been assigned credit quality ratings by rating agencies.

Non-pooled Cash Equivalents and Investments:

All the non-pooled cash equivalents and investments have a maturity date of less than one year.

Money market mutual funds are used as temporary cash management investments. The fair value of these money market funds reflects the net asset value reported by the fund administrator which is a stable $1 per unit. The underlying investments, which are short-term cash equivalent type investments are generally carried at amortized cost which approximates fair value. There are no participant withdrawal limitations.

Funds on Deposit with Fiscal Agent

Investments within the category – Funds on deposit with fiscal agent – are governed by specific trust agreements entered into at the time of the issuance of the related debt. The trust agreements outline the specifically permitted investments, including any limitations on credit quality and concentrations of credit risk.

The State's funds on deposit with fiscal agent reported in the governmental funds (expressed in thousands) at June 30, 2016 and the breakdown by maturity are as follows:

All of the investments have a maturity date of less than one year.

Quality Ratings (1)(At Amortized Cost)

Investment TypeFinancial Company Commercial Paper $ 314,138 $ 314,074 $ 87,407 $ 226,667Other Commercial Paper 35,421 35,421 35,421Asset Backed Commercial Paper 51,620 51,619 51,619Gov't Agency Repurchase Agreements 15,417 15,417 15,417Other Repurchase Agreements 8,000 8,000 2,000 6,000Certif icates of Deposit 77,153 77,153 27,053 50,100Other Municipal Debt 300 300 300Other Notes 31,000 31,000 31,000Other Instruments 9,000 9,000 9,000

$ 542,049 $ 541,984 $ 141,177 $ 400,807

Fair Value Amortized Cost A-1+ A-1At Total

AverageType of Moody's Maturities

Issuer Fair Value Investment Rating in DaysMoney market mutual funds

Fidelity Institutional Money Market Gvt. Port Class III 2,842 Money Market Aaa-mf 45Goldman Sachs Treasury Instruments Fund 52,425 Money Market Aaa-mf 44

$ 55,267

FairInvestment Type ValueMoney Market Mutual Funds $ 138,494Investment Contracts 6,314

$ 144,808

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Money market mutual funds are used as temporary cash management investments. The fair value of these money market funds reflects the net asset value reported by the fund administrator which is a stable $1 per unit. The underlying investments, which are short-term cash equivalent type investments are generally carried at amortized cost which approximates fair value. There are no participant withdrawal limitations.

The investments with fiscal agent (expressed in thousands) consist of the following:

Funds on deposit with fiscal agent also include approximately $201.7 million held by the Federal Unemployment Insurance Trust Fund.

B. Concentration of Credit Risk

The State Investment Commission has adopted limitations as to the maximum percentages of the State’s total short-term investment portfolio that may be invested in a specific investment type or with any one issuer of securities.

The combined portfolio concentrations for cash equivalents, investments and funds in trust by issuer (expressed in thousands) that are greater than 5% are as follows:

C. Pension Trusts

Investments

Investment transactions are recorded on a trade date basis. Gains or losses on foreign currency exchange contracts are included in income consistent with changes in the underlying exchange rates. Dividend income is recorded on the ex-dividend date.

AverageMoody's Maturities

Issuer Fair Value Rating in DaysMoney Market Funds

Dreyfus Treasury Prime Cash Management Fund $ 20 Aaa-mf 24Federated Govt. Obligation Tax Managed Fund 17,017 Aaa-mf 53Fidelity Institutional Money Market Gvt. Port Class III 54,532 Aaa-mf 42First American Government Obligations Fund 34,877 Aaa-mf 26Goldman Sachs Financial Square Money Market Fund 23,334 Aaa-mf 17Wells Fargo Advantage 100% Treasury Money Market Fund 83 Aaa-mf 47Invesco STIT Liquid Asset Portfolio 8,374 Aaa-mf 32Morgan Stanley Prime Portfolio 255 Aaa-mf 21Ocean State Investment Pool 2 N/A N/A

Investment ContractsFSA Capital Management GIC 6,314 N/A N/A

$ 144,808

Type Issuer PercentageMoney Market Funds Fidelity Institutional Money Market Funds Gvt. Port Class I 57,374 8.37%Money Market Funds First American Government Obligations Fund 34,877 5.09%Money Market Funds Goldman Sachs Treasury Instruments Fund 52,425 7.64%

Amount

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Methods Used to Value Investments

Investments are recorded in the financial statements at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Short-term investments are generally carried at cost or amortized cost, which approximates fair value.

The fair value of fixed income securities and domestic and international equity securities is generally based on published market prices and quotations from national security exchanges and securities pricing services. The fair value of mutual fund investments reflects the published closing net asset value as reported by the fund manager.

Commingled funds include institutional domestic equity index and international equity index funds. The fair value of these commingled funds is based on the reported net asset value (NAV) based upon the fair value of the underlying securities or assets held in the fund.

Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded.

The System also trades in foreign exchange contracts to manage exposure to foreign currency risks. Such contracts are used to purchase and sell foreign currency at a guaranteed future price. The change in the estimated fair value of these contracts, which reflects current foreign exchange rates, is included in the determination of the fair value of the System’s investments.

Other investments that are not traded on a national security exchange (primarily private equity, real estate, hedge funds, and infrastructure investments) are valued based on the reported Net Asset Value (NAV) by the fund manager or general partner. Publicly traded investments held by the partnerships are valued based on quoted market prices. If not publicly traded, the fair value is determined by the general partner following U.S. generally accepted accounting principles. Financial Accounting Standards Board ASC Topic 820, Fair Value Measurements and Disclosures, requires hedge funds and private equity, real estate, and infrastructure investment limited partnership general partners to value non-publicly traded assets at current fair value, taking into consideration the financial performance of the issuer, cash flow analysis, recent sales prices, market comparable transactions, a new round of financing, a change in economic conditions, and other pertinent information.

Hedge funds, private equity, real estate, and infrastructure investments represented 14.4%, 7.1%, 6.8%, and 3.4% respectively of the total reported fair value of all pension pooled trusts investments at June 30, 2016.

Investment expenses

Certain investment management expenses are presented separately as a component of net investment income and include investment consultants, custodial fees, direct investment expenses allocated by managers, and allocated Office of the General Treasurer expenses associated with oversight of the portfolio. In some instances (hedge funds, private equity, real estate investments, and cash investments), investment related costs are not readily separable from investment income and consequently investment income is recorded net of related expenses.

Net investment income within the defined contribution plan is reported on a net-of-fees basis.

Cash Deposits and Cash Equivalents

At June 30, 2016, the carrying amounts of the System’s cash deposits was approximately $5.9 million and the bank balance was approximately $1.2 million. The bank and book balances represent the plans’ deposits in short-term trust accounts, which include demand deposit accounts and interest-bearing, collateralized bank deposit accounts. The bank balances include interest-bearing collateralized bank deposits and are either federally insured or collateralized (102%) with U.S. Treasury, agencies, and federal home loan bank letters of credit held by a third party custodian. The primary difference between book and bank balances are deposits in transit.

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In accordance with Rhode Island General Law Chapter 35-10.1, depository institutions holding deposits of the State, its agencies or governmental subdivisions of the State shall, at a minimum, insure or pledge eligible collateral equal to one hundred percent of time deposits with maturities greater than sixty days. Any of these institutions that do not meet minimum capital standards prescribed by federal regulators shall insure or pledge eligible collateral equal to one hundred percent of deposits, regardless of maturity. None of the System’s deposits were required to be collateralized at June 30, 2016 (excluding the collateralized interest-bearing deposits). However, the State Investment Commission has adopted a collateralization requirement for institutions holding the State’s deposits. Financial institutions are required to pledge collateral equal to 102% of the deposit amounts that are not insured by federal depository insurance.

The General Treasurer makes certain short-term investments on a daily basis. Rhode Island General Law Section 35-10-11 (b)(3) requires that all investments shall be made in securities as would be acquired by prudent persons of discretion and intelligence who are seeking a reasonable income and the preservation of capital.

Investments – Pooled Investment Trust The custodian bank holds assets of the System in a Pooled Trust and each plan holds units in the trust. The number of units held by each plan is a function of each plans’ respective contributions to, or withdrawals from, the trust. Investment policy The State Investment Commission (SIC) oversees all investments made by the State of Rhode Island, including those made for the System’s Pooled Investment Trust. The SIC has established an asset allocation policy which may be amended by the SIC Board by a majority vote of its members. The SIC’s asset allocation policy seeks to achieve the assumed rate of return adopted by the System over the long-term while reducing risk through the prudent diversification of the portfolio across various asset classes. Consistent with a target asset allocation model adopted by the SIC, the System directs its separate-account investment managers to maintain, within the mandate specified by the SIC, diversified portfolios by sector, credit rating and issuer using the prudent person standard, which is the standard of care employed solely in the interest of the participants and beneficiaries of the funds and for the exclusive purpose of providing benefits to participants and defraying reasonable expenses of administering the funds.

Specific manager performance objectives are outlined and generally stated in relation to a benchmark or relevant index. These guidelines also include prohibited investments, limitations on maximum exposure to a single industry or single issuer, a minimum number of holdings within the manager’s portfolio and, for fixed income managers, minimum credit quality ratings and duration/maturity targets. Investment expense is allocated to each plan based on the plan’s units in the Pooled Trust at the end of each month.

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The following table presents the fair value of investments by type that are held within the Pooled Trust for the defined benefit plans at June 30, 2016:

Pooled Investment Trust Investment Type

Cash and Cash Equivalents $ 44,845 Money Market Mutual Funds 143,117 US Government Securities 641,616 US Government Agency Securities 322,825 Collateralized Mortgage Obligations 24,446 Corporate Bonds 430,489 Term Loans 322,446 Domestic Equity Securities 461,870 International Equity Securities 296,333 Commingled Funds - Domestic Equity 1,313,511 Commingled Funds - International Equity 1,201,749 Private Equity 533,980 Real Estate 507,980 Hedge Funds 1,081,506 Infrastructure Investments 254,615 Derivative Investments 18 Investments at Fair Value $ 7,581,346

Receivable for investments sold 55,385 Payable for investments purchased (111,424)

Total $ 7,525,307

Fair Value(in thousands)

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Fair value hierarchy

Investments and Derivative Instruments Measured at Fair Value

Debt and equity securities classified in Level 1 of the fair value hierarchy are valued using prices quoted in active markets for those securities. Debt securities classified in Level 2 of the fair value hierarchy are valued using a matrix pricing technique.

(in thousands) Quoted Prices in Active Markets for

Identical Assets

Significant Other Observable

Inputs

Significant Unobservable

InputsInvestments at Fair Value June 30, 2016 (Level 1) (Level 2) (Level 3)

Equity Securities Global Equity 758,203$ 758,132$ $ 71$ Infrastructure - publicly traded 171,211 171,211

929,414$ 929,343$ -$ 71$ Debt Securities

US Government Securities 641,616$ 641,616$ $ $US Government Agency Securities 322,825 322,825 Corporate Bonds 430,488 430,488 Collateralized Mortgage Obligations 24,446 24,446 Term Loans 322,446 322,446

1,741,821$ 641,616$ 777,759$ 322,446$

Total investments by fair value level 2,671,235$ 1,570,959$ 777,759$ 322,517$

Investments measured at the net asset value (NAV) Money Market Mutual Funds 143,117$ Commingled Funds - Domestic Equity 1,313,511 Commingled Funds - International Equity 1,201,750 Hedge Funds 1,081,506 Private Equity 533,979 Real Estate 507,980 Infrastructure Investments 83,405

4,865,248$

Derivative investments Equity index futures 179$ 179$ Other derivatives (net) (161) (161)$

18$

Cash and cash equivalents 44,845$

Net investment payable (56,039)$

Total Pooled Investment Trust 7,525,307$

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The following table presents the investments by type that are measured at the net asset value (NAV) (expressed in thousands):

(1) Money market mutual funds - these investments are used as temporary cash management investments for amounts pending investment or for amounts liquidated from investments pending distribution for pension benefits. The fair value of these money market funds reflects the net asset value reported by the fund administrator which is a stable $1 per unit. The underlying investments which are short-term cash equivalent typed investments are generally carried at amortized cost which approximates fair value. There are no participant withdrawal limitations.

(2) Commingled funds – consist of one domestic and three international equity index funds which are intended to replicate the performance of a specific index; e.g., Russell 3000. The fair values of the investments in this type have been determined using the NAV per share of the investments as reported by the commingled fund manager which reflects the exchange pricing of the equity holdings within each fund. The international equity commingled funds may be only be redeemed at scheduled intervals twice per month. There are no withdrawal limitations for the domestic equity index fund.

(3) Hedge funds – this portfolio is comprised of 17 limited partnerships divided into two sub-categories: hedged equity and absolute return. Hedged equity funds are designed to benefit from the stock market with considerably less risk. They own stakes in companies they expect to outperform and also sell short stocks that they expect to underperform. Absolute return hedge funds employ strategies that seek to generate long-term returns and mitigate risk, regardless of broader market moves. The funds invest across asset classes, including government bonds, other fixed income securities, equity indexes, commodities, and currencies.

The fair values of the investments in this type have been determined using the NAV per share of the investments as reported by the general partner at June 30, 2016. Of the underlying holdings within the hedge funds, approximately 74% were valued based on Tier 1 inputs (unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted investments).

The system's investments in hedge funds are generally subject to “lock-up” provisions that limit (subject to certain exceptions) the ability to withdraw amounts previously invested for a period of one to three years after the initial investment. At June 30, 2016, investments totaling $102,040,478 are subject to these withdrawal limitation provisions. In addition, assets totaling $300,157 are held in Indus Asia Pacific Distribution Holding Company II, Ltd., a vehicle managing the liquidation of investments held in private securities. Cash will be distributed as investments are sold. The remainder of hedge fund assets is available for redemption on a month-end, quarter-end, semi-annual or annual basis, and is subject to notice periods which vary by fund and range from 2 days to 150 days.

Investments measured at the net asset value (NAV)

Fair ValueUnfunded

Commitments

Redemption Frequency (if

currently eligible)

Redemption Notice Period

Money Market Mutual Funds (1) 143,117$ - daily noneCommingled Funds - Domestic Equity (2) 1,313,511 - daily noneCommingled Funds - International Equity (2) 1,201,749 - bi-monthly noneHedge Funds (3) 1,081,506 - see note see notePrivate Equity (4) 533,980 379,661 see note see noteReal Estate (5) 507,980 93,731 see note see noteInfrastructure Investments (6) 83,405 64,975 see note see note

4,865,248$ 538,367$

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(4) Private equity – these 80 limited partnership funds provide the portfolio exposure to private companies through equity and/or debt investments. Private equity fund managers invest in private companies with the goal of enhancing their value over the long-term.

The fair values of the investments in this type have been determined using the NAV per share of the investments as reported by the general partner at June 30, 2016.

Private equity – the investments cannot be redeemed. The nature of these investments provides for distributions through the liquidation of the underlying assets or net operating cash flows.

(5) Real Estate – these 14 limited partnerships investments are comprised of two different private real estate equity components, Core and Non-Core, which generally refer to the relative levels of risk in the underlying assets. Core investments include existing, substantially leased, income-producing properties located principally in economically diversified metropolitan areas. Non-Core investments represent those properties and/or investment strategies that require specialized acquisition and management expertise and skill to mitigate the business and leasing risks that may be associated with individual investments. Non-Core investments, which may be referred to as Value Added and Opportunistic investments, are expected to be held for shorter periods, have greater volatility compared to Core investments, and as such, are expected to provide yields higher than those associated with Core investments.

These funds acquire, manage and sell physical properties, including office, retail, apartment, and industrial buildings as well as more niche property types, such as student housing, self-storage and hotels. The primary goals of this asset class are to provide current income, risk-adjusted total returns, and diversification.


With the exception of five core open-end funds which allow for quarterly redemptions, the investments cannot be redeemed. The nature of these investments provides for distributions through the liquidation of the underlying assets or net operating cash flows.

(6) Infrastructure – These funds provide inflation-protection and current income to the portfolio through investments in facilities and services required for an economy to function including electricity production and distribution, pipelines, sewers and waste management, airports, roads, bridges, ports, railroads, telephone and cable networks, and hospitals.


With the exception of one open-end core fund which allows for quarterly liquidity, the investments cannot be redeemed. The nature of these investments provides for distributions through the liquidation of the underlying assets or net operating cash flows.

Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. Duration is a measure of a debt security’s sensitivity to fair value changes arising from changes in the level of interest rates. It is the weighted average maturity of a bond’s cash flows. The System manages its exposure to interest rate risk by comparing each fixed income manager portfolio’s effective duration against a predetermined benchmark index based on that manager's mandate. The fixed income indices currently used by the System are:

• Barclays US Aggregate Index • Barclays US Treasury Inflation Notes - 1-10 Year Index • Custom loan and high yield index – 30% Bank of America Merrill Lynch 1-3 Year BB-B High Yield,

35% JP Morgan BB/B Leveraged Loan Index and 35% Credit Suisse Institutional Leveraged Loan Index

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At June 30, 2016, no fixed income manager was outside of the policy guidelines. The following table shows the System’s fixed income investments by type, fair value and the effective duration at June 30, 2016:

The System had money market mutual fund investments at June 30, 2016 totaling $143 million including $5 million in the Ocean State Investment Pool Trust (OSIP), an investment pool established by the State General Treasurer. The OSIP is not rated and the weighted average maturity of investments held in the pool, by policy, is not to exceed 60 days. OSIP transacts with its participants at a stable net asset value (NAV) per share. Other money market mutual funds totaling $138 million had a weighted average maturity of approximately 83 days at June 30, 2016. The System invests in various mortgage-backed securities, such as collateralized mortgage obligations (CMO), interest-only and principal-only strips. They are reported in U.S. Government Agency Securities and Collateralized Mortgage Obligations in the table above. CMO’s are bonds that are collateralized by whole loan mortgages, mortgage pass-through securities or stripped mortgage-backed securities. Income is derived from payments and prepayments of principal and interest generated from collateral mortgages. Cash flows are distributed to different investment classes or tranches in accordance with the CMO’s established payment order. Some CMO tranches have more stable cash flows relative to changes in interest rates while others are significantly sensitive to interest rate fluctuations. The System may invest in interest-only and principal-only strips in part to hedge against a rise in interest rates. Interest-only strips are based on cash flows from interest payments on underlying mortgages. Therefore, they are sensitive to pre-payments by mortgagees, which may result from a decline in interest rates. Principal-only strips receive principal cash flows from the underlying mortgages. In periods of rising interest rates, homeowners tend to make fewer mortgage prepayments.

Fair Value EffectiveInvestment Type: (in thousands) Duration

US Government Securities 641,616$ 5.14

US Government Agency Securities 322,825 2.29

Collateralized Mortgage Obligations 24,446 0.42

Corporate Bonds 430,489 6.48

Term Loans 322,446 0.52

Total Fixed Income 1,741,822$ 4.41

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Credit Risk The System manages exposure to credit risk generally by instructing fixed income managers to adhere to an overall target weighted average credit quality for their portfolios and by establishing limits on the percentage of the portfolios that are invested in non-investment grade securities. The System’s exposure to credit risk as of June 30, 2016 is as follows (expressed in thousands):

Ratings for the above were provided by Moody’s Investor Service. Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of investments in a single issuer. There is no single issuer exposure within the System’s pooled investment trust that comprises 5% of the overall portfolio. Custodial Credit Risk

For an investment, custodial credit risk is the risk that, in the event of the failure of a counterparty, the System will not be able to recover the value of its investment or collateral securities that are in the possession of an outside party. At June 30, 2016, all securities were registered in the name of the System (or in the nominee name of its custodial agent) and were held in the possession of the System's custodial bank, Bank of New York Mellon. Foreign Currency Risk

Foreign currency risk is the risk that changes in exchange rates will adversely impact the fair value of an investment. Portfolios are diversified to limit foreign currency and security risk. The System may enter into foreign currency exchange contracts to minimize the short-term impact of foreign currency fluctuations on foreign investments. The System's exposure to foreign currency risk at June 30, 2016, was as follows (expressed in thousands):

Collateralized US GovernmentMortgage Agency Corporate Term

Obligations Securities Bonds LoansRating

Aaa 11,117$ 322,825$ 16,080$ 5,572$ Aa 2,375 19,821 1,083 A 9,361 66,705 1,910 Baa 1,593 234,921 25,975 Ba 50,884 106,183 B 23,856 147,562 Caa 16,206 6,075 Ca 51 348 C 6 D 501 Not Rated 1,959 27,237

Fair Value 24,446$ 322,825$ 430,489$ 322,446$

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In addition to the foreign currency exposure highlighted in the foregoing table, certain hedge and private equity fund investments may have foreign currency exposure. Derivatives and Other Similar Investments Certain of the System’s investment managers are allowed to invest in derivative type transactions consistent with the terms and limitations governing their investment objective and related contract specifications. Derivatives and other similar investments are financial contracts whose value depends on one or more underlying assets, reference rates, or financial indices. The System’s derivative investments include forward foreign currency transactions, futures contracts, options, rights, and warrants. The System enters into these transactions to enhance performance, rebalance the portfolio consistent with overall asset allocation targets, gain or reduce exposure to a specific market, or mitigate specific risks.

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Forward foreign currency contracts The System enters into foreign currency exchange contracts to minimize the short-term impact of foreign currency fluctuations on foreign investments. A currency forward is a contractual agreement to pay or receive specific amounts of foreign currency at a future date in exchange for another currency at an agreed upon exchange rate. If not offset by a corresponding position with the opposite currency exposure, these contracts involve risk in excess of the amount reflected in the System’s Statements of Fiduciary Net Position. The face or contract amount in U.S. dollars reflects the total exposure the System has in currency contracts. The U.S. dollar value of forward foreign currency contracts is determined using forward currency exchange rates supplied by a quotation service. Losses may arise due to changes in the value of the foreign currency or if the counterparty does not perform under the contract.

Futures contracts

The System uses futures to manage its exposure to the domestic and international equity, money market, and bond markets and the fluctuations in interest rates and currency values. Futures are also used to obtain target market exposures in a cost effective manner and to narrow the gap between the System’s actual cash exposures and the target policy exposures. Using futures contracts in this fashion is designed to reduce (or hedge) the risk of the actual plan portfolio deviating from the policy portfolio more efficiently than by using cash securities. The program is only used to manage intended exposures and asset allocation rebalancing. Buying futures tends to increase the System’s exposure to the underlying instrument. Selling futures tends to decrease the System’s exposure to the underlying instrument, or hedge other System investments. Losses may arise due to movements in the underlying or reference markets.

Through commingled funds, the System also indirectly holds derivative type instruments, primarily equity index futures. The System invests in mortgage-backed securities, which are included in the categories described as collateralized mortgage obligations and U.S. Government Agency Securities. These securities are based on the cash flows from interest and principal payments by the underlying mortgages. As a result, they are sensitive to prepayments by mortgagees, which are likely in declining interest rate environments, thereby reducing the value of these securities. The System may sell a security in anticipation of a decline in the fair value of that security or to lessen the portfolio allocation of an asset class. Short sales may increase the risk of loss to the System when the price of a security underlying the short sale increases and the System is obligated to deliver the security in order to cover the position.

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The following summarize the System’s exposure to specific derivative investments at June 30, 2016 (expressed in thousands):

The System is exposed to counterparty risk on foreign currency contracts that are in asset positions. The aggregate fair value of derivative instruments in asset positions at June 30, 2016 was $505 thousand. This represents the maximum loss that would be recognized if all counterparties failed to perform as contracted. Risk is mitigated by using a continuous linked settlement process. Credit default swaps can be used in the portfolio by the credit manager to either obtain exposure to the high yield market efficiently (i.e. by selling protection) at a similar or better price than what can be obtained in cash bonds, or to hedge the credit risk of the portfolio (i.e. buy protection). Interest rate swaps can be used to manage interest rate risk and increase returns in the fixed income or term loan portion of the portfolio. The System executes (through its investment managers) derivative instruments with various counterparties. The credit ratings of these counterparties were Baa2 (Moody’s) or better, one counterparty was not rated by Moody’s but is rated A+ by Standard and Poor’s. Other Investments – Defined Contribution Plan The State Investment Commission selected various investment options for defined contribution plan participants with the overall objective of offering low-cost, strategic, and long-term oriented investment products. Plan participants can choose one or more of the various options and can change options at any time. Plan participants who do not elect a specific option default to a target date retirement fund consistent with their anticipated Social Security retirement eligibility date.

The majority of the defined contribution plan investment options are mutual funds that invest in diversified portfolios of securities including equity and fixed-income investments. Fixed income mutual funds and variable annuity accounts are subject to interest rate, inflation and credit risks. Target-date retirement mutual funds share the risks associated with the types of securities held by each of the underlying funds in which they invest including equity and fixed income funds. Mutual funds may have exposure to foreign currency risk through investment in non-US denominated securities.

Investment Derivative Instruments

Change in fair value included in investment

income Fair Value at June 30, 2016

Notional Amount

Fixed income futures - long 39$ $

Fixed income futures - short

Equity index futures - long 320 179 81,775

Equity index futures - short (1,036)

Credit default swaps 21 101 2,074

Interest rate swaps 54 (262) (4,093)

Total (602)$ 18$

Foreign currency forward contracts: Pending Payable (liability) (1,073)$ Pending Receivable (asset) 505

(568)$

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Of the $514 million of investments held within the defined contribution plan, 91% are in target retirement date mutual funds. Additionally, 98% of plan investments are held in mutual funds that are classified as Level 1 investments within the fair value hierarchy. For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the System will not be able to recover the value of its investment or collateral securities that are in the possession of an outside party. At June 30, 2016, all assets and securities were registered in the name of TIAA-CREF as the Defined Contribution Plan’s record keeper for the benefit of plan members and were held in the possession of TIAA-CREF’s custodian, J.P. Morgan Bank. D. OPEB Trust Funds

The Rhode Island State Employees’ and Electing Teachers OPEB System (OPEB System), which accumulates resources for other post-employment benefit payments to qualified employees, consists of six plans: State employees, Teachers, Judges, State police, Legislators and Board of Education.

Cash Deposits and Cash Equivalents

At June 30, 2016, the carrying amount of the OPEB System’s cash deposits was approximately $3.1 million and the bank balance was $3.1 million. The bank and book balances represent the OPEB System’s deposits in short-term trust accounts, which include fully insured demand deposit accounts and interest-bearing, collateralized bank deposit accounts.

In accordance with Rhode Island General Law Chapter 35-10.1, depository institutions holding deposits of the State, its agencies or governmental subdivisions of the State shall, at a minimum, insure or pledge eligible collateral equal to one hundred percent of time deposits with maturities greater than sixty days. Any of these institutions that do not meet minimum capital standards prescribed by federal regulators shall insure or pledge eligible collateral equal to one hundred percent of deposits, regardless of maturity. In addition, the State Investment Commission has adopted a collateralization requirement for institutions holding the State’s deposits. Financial institutions are required to pledge collateral equal to 102% of the uninsured deposit amounts. At June 30, 2016, the OPEB System’s cash deposits were either federally insured or collateralized.

In addition, at June 30, 2016, the OPEB System also had cash equivalent investments consisting of approximately $.8 million in the Ocean State Investment Pool Trust (OSIP), an investment pool established by the State General Treasurer. The System’s investment accounted for 0.1% of the total investment in OSIP at June 30, 2016. Funds of agencies, authorities, commissions, boards, municipalities, political subdivisions, and other public units of the State are eligible to invest in OSIP. OSIP operates in a manner consistent with GASB 79 – Certain External Investment Pools and Pool Participants, and thus reports all investments at amortized cost rather than fair value. The OSIP is not rated and the weighted average maturity of investments held in the pool, by policy, is not to exceed 60 days. OSIP transacts with its participants at a stable net asset value (“NAV”) per share. Investments reported at the NAV are not subject to Fair Value Hierarchy. There are no participant withdrawal limitations. OSIP issues a publicly available financial report that can be obtained by writing to the Office of the General Treasurer, Finance Department, 50 Service Avenue - 2nd Floor, Warwick, RI 02886.

Investments

The State Investment Commission oversees all investments made by the State of Rhode Island, including those made for the OPEB System. The General Treasurer makes certain short-term investments on a daily basis. Rhode Island General Law Section 35-10-11 (b) (3) requires that all investments shall be made in securities as would be acquired by prudent persons of discretion and intelligence who are seeking a reasonable income and the preservation of capital.

The assets of each of the plans are pooled for investment purposes only, and units are assigned to the plans based on their respective share of market value. The custodian bank holds assets of the OPEB System in a Pooled Account and each plan holds units in the account. The number of units held by each plan is a function

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of each plan’s respective contributions to, or withdrawals from, the account. Investment expense is allocated to each plan based on the plan’s units in the pooled trust at the end of each month.

Consistent with a target asset allocation model adopted by the State Investment Commission, the OPEB System maintains a diversified portfolio by sector, credit rating and issuer using the prudent person standard, which is the standard of care employed solely in the interest of the participants and beneficiaries of the funds and for the exclusive purpose of providing benefits to participants and defraying reasonable expenses of administering the funds.

The following table presents the fair value of investments by type that are held within the pooled trust at June 30, 2016 (expressed in thousands):

Commingled funds – consist of one domestic equity index fund which is intended to replicate the performance of a specific index; e.g., S&P 500. The fair values of the investments have been determined using the NAV per share of the investments as reported by the commingled fund manager which reflects the exchange pricing of the equity holdings. There are no withdrawal limitations for the domestic equity index fund.

Interest Rate Risk

Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment.

The following table shows the OPEB System’s fixed income investments by type, fair value and the effective duration at June 30, 2016 (expressed in thousands):

The OPEB System’s investment in the Dreyfus Institutional Cash Advantage Fund, a money market mutual fund, had an average maturity of 24 days at June 30, 2016.

EffectiveInvestment Type: Fair Value DurationUS Government Securities 22,081$ 7.44US Government Agency Securities 18,202 2.00Corporate Bonds 20,010 7.00

60,293$ 4.97

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Credit Risk

The OPEB System generally manages exposure to credit risk by adhering to an overall target weighted average credit quality for the portfolio. The OPEB System’s exposure to credit risk on corporate bonds as of June 30, 2016 is as follows (expressed in thousands):

The OPEB System’s investment in a short-term money market mutual fund (Dreyfus Institutional Cash Advantage Fund) was rated AAAm by Standard & Poor’s Investors Service.

Concentration of Credit Risk

Concentration of credit risk is the risk of loss attributed to the magnitude of the OPEB System’s investments in a single issuer. There is no single issuer exposure within the OPEB System’s portfolio that comprises more than 5% of the overall portfolio.

Custodial Credit Risk

For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the OPEB System will not be able to recover the value of its investment or collateral securities that are in the possession of an outside party. At June 30, 2016, all securities were registered in the name of the OPEB System (or in the nominee name of its custodial agent) and were held in the possession of its custodial bank, Bank of New York Mellon.

Derivatives and Other Similar Investments

Through its commingled fund, the OPEB System indirectly holds derivative type instruments, primarily equity index futures.

E. Private Purpose Trusts

The Tuition Savings Program had investments of approximately $6.7 billion in a number of mutual funds and other investment vehicles as of June 30, 2016. These investments are categorized as Level 1 of the fair value hierarchy.

The Touro Jewish Synagogue Fund had investments of approximately $2.7 million in the Fidelity Balanced Fund as of June 30, 2016. These investments are categorized in Level 1 of the fair value hierarchy.

F. Agency Funds

As of June 30, 2016, all of the bank balances of Agency Funds were either covered by federal depository insurance or collateralized by securities held by an independent third party in the State’s name.

US GovernmentAgency Corporate

Rating (1) Securities Bonds

Aaa 18,202$ 576$ Aa 1,504 A 6,240 Baa 11,469 Ba 221

Fair Value 18,202$ 20,010$

(1) Moody's Investor Service

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Note 3. Receivables

Receivables at June 30, 2016 (expressed in thousands) consist of the following:

Note 4. Intra-Entity Receivables and Payables

Intra-entity receivables and payables as of June 30, 2016 are the result of ongoing operations and are expected to be reimbursed within the subsequent fiscal year. They are summarized below (expressed in thousands):

Governmental receivables $ 488,064 $ 526,261 $ 11,054 $ 1,025,379 $ 154,894 $ 51,597Less: Allowance for Uncollectibles 108,545 111,411 2,630 222,586

Governmental receivables, net 379,519 414,850 8,424 802,793 154,894 51,597

Business-type receivables 81,486 28,261 109,747 1,362Less: Allowance for Uncollectibles 4,238 18,474 22,712

Business-type receivables, net 77,248 9,787 87,035 1,362

Uncollectibles 456,767 424,637 8,424 889,828 156,256 51,597

Less: Current PortionGovernmental receivables 373,500 399,350 4,952 777,802 143,868 4,222Business-type receivables 77,248 9,787 87,035 1,362

Noncurrent Receivables, Net $ 6,019 $ 15,500 $ 3,472 $ 24,991 $ 11,026 $ 47,375

Primary GovernmentReceivables,

Net

Due from OtherGovernmentsand Agencies

TotalNotes and

Receivables, Net of Allowance for

UnitsComponent

Due from

ReceivableTaxes Accounts

ReceivableLoans

Receivable

Interfund InterfundReceivable Payable Description

Governmental FundsMajor Funds

General $ 4,054 $ Operating expensesIntermodal Surface Transportation 941 Transportation funding

Non-Major FundsRI Temporary Disability Insurance 84 Operating expensesRI Historic Tax Credit 306 Tax credit fees ow ed to fundBond Capital 1,115 Project fundingRI Capital Plan 1,225 Primarily for transportation State match

Total Non-Major Funds 390 2,340

Total Governmental Funds 5,385 2,340

Proprietary FundsEnterprise

RI Lottery 444 1,679 Net income ow ed to General FundRI Convention Center Authority 269 172 Project fundingEmployment Security Trust 990 Benefit payments

Total Enterprise Funds 713 2,841

Internal Service 1,023 1,940 Settlement of services rendered

Total primary government $ 7,121 $ 7,121

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Note 5. Capital Assets

The capital asset activity of the reporting entity for the year ended June 30, 2016 consists of the following (expressed in thousands):

Primary Government

* Beginning balances have been restated.

The current period depreciation or amortization was charged to the governmental functions on the Statement of Activities as follows:

Governmental Activities

Capital assets not being depreciated or amortized:Land $ 392,753 $ 3,157 $ (2,171) $ 393,739Works of Art 2,923 526 3,449Intangibles 170,130 1,862 171,992Construction in progress* 513,518 346,553 (211,792) 648,279

Total capital assets not being depreciated or amortized 1,079,324 352,098 (213,963) 1,217,459Capital assets being depreciated or amortized:

Land improvements 3,700 965 4,665Buildings 721,971 3,294 (714) 724,551Building Improvements 279,919 92,677 372,596Furniture and equipment 294,897 21,340 (11,444) 304,793Intangibles 14,040 14,040Infrastructure 3,954,550 114,844 4,069,394

Total capital assets being depreciated or amortized 5,269,077 233,120 (12,158) 5,490,039Less accumulated depreciation or amortization for:

Land improvements 3,501 49 3,550Buildings 250,883 22,280 (453) 272,710Building Improvements 200,244 2,353 202,597Furniture and equipment 234,744 18,957 (11,149) 242,552Intangibles 14,042 14,042Infrastructure 1,794,871 132,308 1,927,179

Total accumulated depreciation or amortization 2,498,285 175,947 (11,602) 2,662,630Total capital assets being depreciated or amortized, net 2,770,792 57,173 (556) 2,827,409Governmental activities capital assets, net $ 3,850,116 $ 409,271 $ (214,519) $ 4,044,868

Beginning EndingBalance Increases Decreases Balance

General government $ 9,165Human services 7,183Education 6,422Public safety 15,422Natural resources 5,645Transportation 132,110

Total depreciation or amortization expense - governmental activities $ 175,947

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* Beginning balances have been restated.

Business-type Activities

Capital assets not being depreciated:Land $ 46,808 $ $ $ 46,808Construction in progress 178 285 (170) 293

Total capital assets not being depreciated 46,986 285 (170) 47,101Capital assets being depreciated:

Buildings 234,384 234,384Machinery and equipment 31,255 2,154 (2,305) 31,104Intangibles 175 175

Total capital assets being depreciated 265,814 2,154 (2,305) 265,663

Less accumulated depreciation for:Buildings 133,836 8,182 142,018Machinery and equipment 24,330 2,328 (2,306) 24,352Intangibles 65 25 90

Total accumulated depreciation 158,231 10,535 (2,306) 166,460Total capital assets being depreciated, net 107,583 (8,381) 1 99,203

Business-type activities capital assets, net $ 154,569 $ (8,096) $ (169) $ 146,304

Balance Increases Decreases BalanceBeginning Ending


Capital assets not being depreciated or amortized:Land * $ 117,441 $ 3,375 $ (233) $ 120,583Construction in progress 175,791 100,965 (178,556) 98,200Other 250 250

Total capital assets not being depreciated or amortized 293,482 104,340 (178,789) 219,033Capital assets being depreciated or amortized:

Buildings * 2,075,187 176,533 (514) 2,251,206Land improvements * 217,730 6,666 (22) 224,374Machinery and equipment * 429,510 39,968 (8,030) 461,448Infrastructure 229,924 32,364 (465) 261,823

Total capital assets being depreciated or amortized 2,952,351 255,531 (9,031) 3,198,851Less accumulated depreciation or amortization for:

Buildings * 802,436 71,045 (218) 873,263Land improvements * 130,139 7,121 137,260Machinery and equipment * 272,056 32,973 (7,218) 297,811Infrastructure 70,475 10,625 81,100

Total accumulated depreciation or amortization 1,275,106 121,764 (7,436) 1,389,434Total capital assets being depreciated or amortized, net 1,677,245 133,767 (1,595) 1,809,417Total capital assets, net $ 1,970,727 $ 238,107 $ (180,384) $ 2,028,450

Balance Increases Decreases BalanceBeginning Ending

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Note 6. Long-Term Liabilities A. Changes in Long-Term Liabilities

Changes in long-term liabilities for the year ended June 30, 2016 are presented in the following table:

Certain beginning balances have been reclassified to conform to the current financial statement presentation.

Governmental ActivitiesBonds PayableGeneral obligation bonds (see section B) $ 1,022,895 $ 300,955 $ (272,040) $ 1,051,810 $ 47,930 $ 1,003,880RICC Grant Anticipation Revenue Bonds 244,870 230,280 (244,870) 230,280 230,280RICC Rhode Island Motor Fuel Tax Revenue Bonds 58,340 (4,375) 53,965 4,200 49,765Tobacco Settlement Asset-Backed Bonds 716,201 (21,155) 695,046 11,335 683,711Accreted interest on TSFC bonds 73,379 11,845 85,224 85,224RICC Historic Tax Credit Bonds 132,390 (25,395) 106,995 26,770 80,225Net unamortized premium/discount 139,869 73,516 (26,244) 187,141 187,141

Bonds Payable, net 2,387,944 616,596 (594,079) 2,410,461 90,235 2,320,226

Obligation under capital leases (see section E) 235,130 5,021 (25,830) 214,321 27,976 186,345Net unamortized premium/discount 20,451 (3,682) 16,769 16,769

Obligation under capital leases, net 255,581 5,021 (29,512) 231,090 27,976 203,114

Net pension liability (see note 13) 1,917,169 195,936 2,113,105 2,113,105Net pension liability-special funding situation (see note 13) 990,129 127,266 1,117,395 1,117,395Net OPEB Obligation (see note 14 C) 8,520 (17) 8,503 8,503Job Creation Guaranty Program Obligation (see section H) 64,097 (26,007) 38,090 38,090Compensated absences (see section J) 77,900 78,524 (81,213) 75,211 68,579 6,632Special obligation notes 3,075 (3,075)Pollution remediation (see section I) 5,499 2,148 (4,042) 3,605 2,148 1,457Other (see section M) 8,395 13,555 (6,826) 15,124 878 14,246

Total Governmental Long-term Liabilities $ 5,718,309 $ 1,039,046 $ (744,771) $ 6,012,584 $ 189,816 $ 5,822,768

Business-type ActivitiesRevenue bonds (see section B) $ 215,210 $ $ (11,330) $ 203,880 $ 11,440 $ 192,440Net unamortized premium/discount 6,564 (1,817) 4,747 4,747

Revenue bonds, net 221,774 (13,147) 208,627 11,440 197,187

Net pension liability 13,315 1,759 15,074 15,074Unearned Revenue 8,116 1,983 (913) 9,186 4,833 4,353Compensated absences (see section J) 506 386 (327) 565 233 332

Total Business-type Long-term Liabilities $ 243,711 $ 4,128 $ (14,387) $ 233,452 $ 16,506 $ 216,946

Component UnitsBonds payable (see section B) $ 2,706,958 $ 614,662 $ (553,503) $ 2,768,117 $ 117,478 $ 2,650,639Net unamortized premium/discount 74,331 47,301 (19,397) 102,235 14,534 87,701

Bonds Payable, net 2,781,289 661,963 (572,900) 2,870,352 132,012 2,738,340

Notes payable (see section C) 141,950 338,083 (366,045) 113,988 79,384 34,604Loans payable (see section D) 47,610 772 (1,563) 46,819 1,177 45,642Obligations under capital leases 6,224 351 (1,321) 5,254 1,318 3,936Net pension liability 238,714 32,720 (32) 271,402 271,402Net OPEB obligation 61,627 6,710 (15) 68,322 68,322Compensated absences (see section J) 31,336 1,750 (1,880) 31,206 10,171 21,035Due to primary government (see section L) 56,481 (4,884) 51,597 4,222 47,375Unearned Revenue 24,356 590 (4,373) 20,573 6,305 14,268Due to Component Units 3,315 105 (1,599) 1,821 343 1,478Other Long-term liabilities Arbitrage rebate (see section K) 2,413 (872) 1,541 600 941 Pollution remediation (see section I) 21,184 5,755 26,939 1,412 25,527 Other liabilities (see section M) 322,994 31,270 (8,085) 346,179 13,301 332,878

Total Component Units Long-term Liabilities $ 3,739,493 $ 1,080,069 $ (963,569) $ 3,855,993 $ 250,245 $ 3,605,748

Beginning Ending

Long-term Liabilities(Expressed in Thousands)

AmountsDue

AmountsDue Within

ThereafterOne YearBalance* BalanceReductionsAdditions

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B. Bonds Payable

At June 30, 2016, future debt service requirements were as follows (expressed in thousands):

Primary Government - Governmental Activities

General obligation bonds of the State are serial bonds with interest payable semi-annually.

In July 2015 the State issued $175.2 million of general obligation refunding bonds with interest rates ranging from 2.00% to 5.00%, maturing from 2017 through 2028. These bonds, combined with the premium of $23.8 million, were used to advance refund $190.1 million of bonds with interest rates from 4.00% to 6.00% and maturities from 2016 to 2028. The refunding resulted in a reduction of debt service of $7.4 million and an economic gain (difference between the present value of the debt service payments on the old and new debt) of $634 thousand. A deferred loss on the refunding of approximately $3.2 million was recorded.

In May 2016 the State issued $58.8 million of general obligation bonds with interest rates ranging from 2.00% to 5.00%, maturing from 2018 through 2036 and $13.1 million of taxable general obligation bonds with interest rates ranging from 0.750% to 1.750%, maturing from 2017 through 2021. The premium paid on these bonds was $4.8 million and $55 thousand, respectively. The State also issued $53.8 million of general obligation refunding bonds with an interest rate of 5.00%, maturing from 2018 through 2023, with a premium of $6.2 million. These bonds, combined with the premium, were used to advance refund $58.4 million of bonds with interest rates from 4.00% to 5.00% and maturities from 2017 to 2023. The refunding resulted in a reduction of debt service of $4.26 million and an economic gain (difference between the present value of the debt service payments on the old and new debt) of $4.25 million. A deferred loss on the refunding of approximately $42 thousand was recorded.

At June 30, 2016, general obligation bonds authorized by the voters and unissued amounted to approximately $319.6 million. In accordance with the General Laws, unissued bonds are subject to extinguishment seven years after the debt authorization was approved, unless extended by the General Assembly.

In addition to the debt authorized by the voters for which the full faith and credit is pledged, the General Assembly has authorized the issuance of other debt that is subject to annual appropriation. The following authorizations have been enacted and the State plans to issue the debt over the next several years: (1) Energy Conservation Certificates of Participation - $7.0 million and (2) Nursing Education Center Debt - $36 million.

Historic Tax Credit Bonds - In fiscal years 2009 and 2015 the R.I. Commerce Corporation (RICC), on behalf of the State, issued $150 million and $75 million, respectively, of revenue bonds under the Historic Structures Tax Credit Financing Program. The bonds do not constitute a debt, liability, or obligation of the State or any political subdivision thereof. The State is obligated under a Payment Agreement to make payments to the trustee, subject to annual appropriation by the General Assembly. The proceeds of the bonds are being used

Governmental Activities Business Type Activities Component Units

Principal Interest Principal Interest Principal Interest$ 90,235 $ 92,588 $ 11,440 $ 11,025 $ 117,478 $ 106,345

122,835 88,742 11,110 10,463 132,510 102,133138,375 83,051 11,660 9,906 141,497 97,315145,505 76,665 12,240 9,312 139,905 91,880144,835 70,059 14,350 8,693 141,298 86,080

2022 - 2026 633,500 249,518 80,980 31,993 652,390 349,5342027 - 2031 292,120 135,165 38,200 12,413 568,470 222,5482032 - 2036 137,550 83,892 23,900 3,727 420,930 118,3942037 - 2041 105,405 62,159 281,465 53,9242042 - 2046 85,820 45,730 109,204 23,5522047 - 2051 121,130 24,226 56,150 6,7152052 - 2056 120,786 1,608,984 * 5,785 7182057 - 2061 1,035 21

$ 2,138,096 $ 2,620,779 $ 203,880 $ 97,532 $ 2,768,117 $ 1,259,159

* Accreted interest on capital appreciation bonds of the Tobacco Settlement Financing Corporation.

Primary GovernmentFiscalYear

Ending

20202021

June 30201720182019

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to provide funds for redemption of Historic Structures Tax Credits. There is remaining authorization to issue up to $131.2 million of Historic Tax Credit Bonds.

RICC Grant Anticipation Bonds and Rhode Island Motor Fuel Tax Revenue Bonds - RICC, on behalf of the State, issues special obligation debt. Grant Anticipation Revenue Vehicle Bonds are payable solely from future federal aid revenues to be received by the State in reimbursement of federally eligible costs of specific transportation construction projects. Rhode Island Motor Fuel Tax Revenue Bonds are payable solely from certain pledged revenues derived from two cents ($.02) per gallon of the thirty-three cents ($.33) per gallon Motor Fuel Tax. The bonds provide the State matching funds for the Grant Anticipation Revenue Vehicle Bonds. The bonds do not constitute a debt, liability, or obligation of the State or any political subdivision thereof.

In May 2016 RICC issued $230.3 million of general Grant Anticipation refunding bonds with interest rates ranging from 3.00% to 5.00%, maturing from 2019 through 2024. These bonds, combined with the premium of $38.6 million, were used to advance refund $244.9 million of bonds with interest rates from 3.75% to 5.25% and maturities from 2016 to 2021. The refunding resulted in a reduction of debt service of $11.3 million and an economic gain (difference between the present value of the debt service payments on the old and new debt) of $2.4 million. A deferred loss on the refunding of approximately $18.2 million was recorded. The obligation of the State to make payments to the trustee of future federal aid revenues and future pledged motor fuel taxes is subject to annual appropriation by the General Assembly. Pledged revenues were sufficient to fund fiscal 2016 debt service payments for Grant Anticipation and Motor Fuel Tax Revenue Bonds. These revenues have been pledged for the term of the Grant Anticipation and Motor Fuel Tax Revenue Bonds through fiscal 2024 and 2027, respectively.

Tobacco Settlement Asset-Back Bonds and Accreted Interest – The Tobacco Settlement Financing Corporation (TSFC) has issued $685.4 million (2002 Series), $197 million (2007 Series), and $620.9 million (2015 Series) of Tobacco Settlement Asset-Backed Bonds. The bond proceeds of the 2002 Series and the 2007 Series were used to purchase the State’s future rights in the Tobacco Settlement Revenues (TSRs) under the Master Settlement Agreement and the Consent Decree and Final Judgment. The 2015 Series bond proceeds were used to fully redeem the remaining balance, $547.8 million, of the 2002 Series bonds, and to repurchase and retire a portion of the 2007 Series bonds, in the amount of $76.2 million.

All of the bonds are subject to a number of early redemption provisions, in whole or in part, at the redemption price of 100% of the principal amount plus accrued interest, without premium. Term Maturities represent the minimum amount of principal that the Corporation has to pay as of specific dates. Certain of the bonds are Capital Appreciation Bonds, on which no periodic interest payments are made, but which were issued at a deep discount from par and accrete to full value at maturity in the year 2052. The bond indenture contains “Turbo Maturity” provisions, whereby the Corporation is required to apply the funds collected that are in excess of the then current funding requirements of the indenture to the early redemption of certain of the Series 2015 B bonds (based upon a minimum turbo redemption schedule established for the bonds) and then to the Series 2007 bonds. The amount available for turbo redemptions on the Series 2015 B bonds are credited against the term maturities in ascending chronological order based on a schedule contained in the indenture. Excess turbo funds available, if any, will be used to retire Series 2007 bonds.

The bonds are payable both as to principal and interest solely out of the assets of the Corporation pledged for such purpose, and neither the faith and credit nor the taxing power of the State of Rhode Island or any political subdivision thereof is pledged to the payment of the principal of or the interest on the bonds. The bonds do not constitute an indebtedness of or a general, legal or “moral” obligation of the State or any political subdivision of the State.

Primary Government - Business-Type Activities

R.I. Convention Center Authority

The R.I. Convention Center Authority (RICCA) is limited to the issuance of bonds or notes in an aggregate principal amount of $305 million. At June 30, 2016, outstanding bond indebtedness totaled $203.9 million.

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In June 2006, RICCA issued Civic Center Revenue Bonds, 2006 Series A (federally taxable), in an aggregate principal amount of $92.5 million for the purpose of (i) financing or refinancing the acquisition, renovation, equipping, improvement and redevelopment of the Dunkin’ Donuts Center (DDC), (ii) redeeming the $33.0 million Civic Center Revenue Bonds, 2005 Series A, previously issued by RICCA, (iii) paying the costs of issuance, and (iv) paying capitalized interest on the 2006 Series A Bonds. The 2006 Series A bonds mature between 2008 and 2035 and bear interest at rates ranging from 5.59% to 6.06%. In March 2009, RICCA issued Refunding Revenue Bonds, 2009 Series A, in an aggregate principal amount of approximately $70.7 million for the purpose of (i) redeeming $59.2 million of then outstanding 2001 Series A Bonds, (ii) financing the termination of a Swap Agreement, (iii) purchasing debt service reserve insurance and bond insurance under a financial guaranty policy, and (iv) paying the costs of issuance. The 2009 Series A bonds mature between 2011 and 2027 and bear interest at rates ranging from 3.00% to 5.50%. Concurrent with the issuance of the 2009 Series A Bonds, a financial guaranty insurance policy was issued by Assured Guaranty Corp. (AGC). The policy provides maximum coverage for principal and interest payments on the 2009 Series A Bonds of approximately $127.5 million. Coverage under the policy expires on May 15, 2027. In August 2016, AGC was rated by Moody’s as A2. In July 2016, AGC was rated by S&P as A. Fitch no longer provides ratings of AGC. Also concurrent with the issuance of the 2009 Series A Bonds, a Debt Service Reserve Fund Facility (the Facility) was issued by Assured Guaranty Municipal Corp., formerly Financial Security Assurance, Inc. (FSA) to meet the Debt Service Reserve Fund requirement. The Facility provides maximum coverage of approximately $16.2 million. Coverage under the Facility expires at the earlier of May 15, 2027 or the date upon which the 2009 Series A Bonds are no longer outstanding. In August 2016, FSA was rated by Moody’s as A2. In July 2016, FSA was rated by S&P as A. Fitch no longer provides ratings of FSA. During March 2013, RICCA issued Refunding Revenue Bonds, 2013 Series A, in an aggregate principal amount of approximately $37.2 million for the purpose of refunding the Authority’s then outstanding Refunding Revenue Bonds, 2003 Series A, refunding a portion of RICCA’s Refunding Revenue Bonds, 1993 Series B, and to pay costs of issuance. The 2013 Series A bonds bear interest at rates ranging from 2% to 5.25% and mature in varying installments beginning May 15, 2015 through May 15, 2020. During April 2015, RICCA issued Refunding Revenue Bonds 2015 Series A in an aggregate amount of $31.9 million for the purpose of refunding RICCA’s then outstanding Refunding Revenue Bonds, 2005 Series A and refunding a portion of RICCA’s then outstanding Refunding Revenue Bonds 1993 Series B and to pay costs of issuance. The final principal and interest payment for the 1993 Series B occurred on May 15, 2015. The 2015 Series A bonds mature between 2015 and 2023 and bear interest at rates ranging from 2.00% to 5.00%. All outstanding indebtedness is subject to optional and mandatory redemption provisions. Mandatory redemption is required for certain bonds over various years through 2027 at the principal amount of the bonds. Certain bonds may be redeemed early, at the option of RICCA, at amounts ranging from 100% to 102% of the principal balance. At June 30, 2016, RICCA had no outstanding in-substance defeased debt. Outstanding indebtedness is collateralized by all rents receivable (if any) under a lease and agreement between RICCA and the State covering all property purchased by RICCA for the site, all other revenues and receipts from the project, a mortgage on constructed facilities, land financed by proceeds of the bonds, and amounts held in various accounts into which bond proceeds were deposited. In addition, outstanding indebtedness is insured under certain financial guaranty insurance policies. Each of the bond resolutions contains certain restrictive covenants. During the year ended June 30, 2016, RICCA was unable to fund the Operating Reserve requirement of the restrictive covenants for the R.I. Convention Center and the DDC pursuant to the indentures. During the year ended June 30, 2016, RICCA was unable to fund the Renewal and Replacement requirement of the restrictive covenant for the DDC pursuant to the indenture. RICCA and the R.I. Department of Administration have entered into agreements that provide for total appropriations from the RI Capital Plan (RICAP) for various purposes, including funding the Renewal and

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Replacement requirement of the restrictive covenant for the DDC. Detailed information regarding these agreements is in RICCA’s financial statements for the fiscal year ended June 30, 2016. RICCA maintains an agreement with AMBAC Indemnity Corporation (AMBAC) under which AMBAC provides RICCA with surety bond coverage to meet Debt Service Reserve Fund requirements for the R.I. Convention Center. The surety bond provides a maximum coverage of $15.2 million. Coverage under the surety bond expires on May 15, 2023. RICCA maintains additional agreements with AMBAC for the R.I. Convention Center under which AMBAC provides RICCA with separate surety bond coverages to meet Debt Service Reserve Fund and Operating Reserve Fund requirements, respectively. The surety bond relating to the Debt Service Reserve Fund requirements replaced mandated investments and provides a maximum coverage of approximately $8.8 million. The surety bond relating to the Operating Reserve Fund requirements also replaced mandated investments and provides a maximum coverage of approximately $3.9 million. Coverage under both surety bonds expires on May 15, 2027. The Debt Service and Operating Reserve Fund Facilities are required to have a credit rating in one of the three highest categories by Moody’s and S&P. As of June 30, 2016, AMBAC’s credit rating did not meet the aforementioned requirement, however, RICCA acquired from Assured Guaranty Corporation a surety bond that meets the Debt Service Reserve Fund requirement for the R.I. Convention Center. RICCA is required by the Internal Revenue Service, as well as its various bond resolutions, to comply with certain tax code provisions and bond covenants. The most significant of these include the following: all debt payments must be current, annual reports and budgets must be filed with the trustee, and RICCA must comply with various restrictions on investment earnings from bond proceeds.


University of Rhode Island, Rhode Island College and the Community College of Rhode Island

The University of Rhode Island (URI), Rhode Island College (RIC), and the Community College of Rhode Island (CCRI) have issued a number of series of revenue bonds to finance housing, student union (including bookstores) and dining facilities. Under terms of the trust indentures, certain net revenues from these operations must be transferred to the trustees for payment of interest, retirement of bonds, and maintenance of facilities. The bonds are payable in annual or semi-annual installments to various maturity dates. Revenue bonds also include amounts borrowed under loan and trust agreements between the R.I. Health and Educational Building Corporation (RIHEBC) and the Board of Education acting for URI, RIC, and CCRI. The agreements provide for RIHEBC's issuance of the bonds with a loan of the proceeds to the University and Colleges and the payment by the University and Colleges to RIHEBC of loan payments that are at least equal to debt service on the bonds. The bonds are secured by a pledge of revenues of the respective institutions.

At June 30, 2016 revenue bonds outstanding were approximately as follows: URI - $210.6 million, RIC - $16.4 million, and CCRI - $2.3 million.

R.I. Airport Corporation

Revenue bonds are issued by RICC on behalf of RIAC. The proceeds from these bonds are used to finance construction and related costs of certain capital improvements. These bonds, except for the 2006 First Lien Special Facility Bonds, are secured by the net revenues derived from the operation of the airports. The 2006 First Lien Special Facility Bonds are secured solely by the net revenues derived from the InterLink facility.

Per its Master Indenture of Trust and Supplemental Indentures, RIAC has pledged net revenues derived from the operation by RIAC of the Airport and certain general aviation airports to repay approximately $224.6 million in airport revenue bonds. Proceeds from the bonds were used for various airport improvement projects. Amounts available to pay debt service per the Master Indenture, including pledged passenger facility charges, were approximately $40.7 million for the year ended June 30, 2016. Principal and interest payments for the year ended June 30, 2016 were approximately $19.0 million.

In January 2016, RIAC issued $27.7 million Series A Airport Revenue Refunding Bonds, $27.0 Series B Airport Revenue Refunding Bonds and $30.9 million Series C Airport Revenue Refunding Bonds, along with a cash paydown of $8.3 million, to enable the defeasance of $30.0 million in 2005 Series A General Airport Revenue Bonds, $27.2 million in 2005 Series B General Airport Revenue Bonds and $35.9 million in 2005

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Series C General Airport Revenue Bonds. The 2016 Series A refunding issue matures monthly from 2016 through 2025 with interest coupons of 2.49%. The 2016 Series B refunding issue matures monthly from 2016 through 2030 with interest coupons of 3.69%. The series 2016 Series C refund issue matures monthly from 2016 through 2025 with interest coupons of 2.24 %. RIAC’s defeasance of the 2005 Bonds resulted in economic present value savings of $12.2 million or 13.11% of refunded bonds. The cash savings of the difference was approximately $22.3 million. The refunding resulted in a deferred charge on refunding in the amount of approximately $122 thousand, which is included in Deferred Outflows of Resources in the Statement of Net Position.

I-195 Redevelopment District Commission

In April 2013, RICC issued Economic Development Revenue Bonds 2013 Series A, and Economic Development Bonds 2013 Series B (federally taxable) in the aggregate principal amounts of $38.4 million, for which the I-195 RDC is the obligor. The 2013 Series A Bonds mature in April 2033 and bear interest at the lesser of the 30-Day London InterBank Offered Rate (LIBOR) (0.466% at June 30, 2016) plus applicable margin, or 7.75%. Applicable margin is the rate that corresponds to the lesser of the two long-term bond ratings of the State from Moody’s Investors Service (Moody’s) and Standard & Poor’s (S&P) in the following table:

At June 30, 2016, the State’s general obligation bonds were rated AA and Aa2 by S&P and Moody’s, respectively. As such, at June 30, 2016, the 2013 Series A Bonds bore interest at 1.466%.

Concurrently with the issuance of the 2013 Series A Bonds, RICC issued Economic Development Bonds, 2013 Series B (federally taxable), in the aggregate principal amount of $960 thousand, for which the I-195 RDC is the obligor. The 2013 Series B Bonds mature in April 2019 and bear interest at the lesser of the 30-Day LIBOR (0.466% at June 30, 2016) plus the lesser of the two long-term bond ratings of the State from Moody’s and S&P in the following table:

Based on the State’s most recent bond ratings, the 2013 Series B bonds bore interest at 1.616% at June 30, 2016.

Proceeds from the 2013 Series A and B bonds were transferred by the I-195 RDC to the State.

Simultaneously with the issuance of the 2013 Series A and B Bonds, the I-195 RDC, RICC, and a Bank entered into a bond purchase agreement under the terms of which the 2013 Series A and B Bonds were purchased by the Bank. The Bank holds a mandatory tender option to sell the bonds to RICC on either April 1, 2023 or April 1, 2028.

Concurrent with the issuance of the 2013 Series A and B Bonds, the State entered into separate rate cap transaction agreements with the Bank for each bond series (the 2013 Series A and B Rate Cap Agreements). Under the terms of the 2013 Series A Rate Cap Agreement, the State paid the Bank $658,500. In exchange, the Bank agreed to pay the State interest on a monthly basis at 30-Day LIBOR, to the extent 30-Day LIBOR exceeds the interest rate cap, on the notional amount, which mirrors the scheduled principal balance of the 2013 Series A Bonds, through April 1, 2023. The interest rate under the 2013 Series A Rate Cap Agreement is capped at 6.75%. Under the terms of the 2013 Series B Rate Cap Agreement, the Bank agreed to pay the State interest on a monthly basis at 30-Day LIBOR (0.46655% at June 30, 2016), to the extent 30-Day LIBOR exceeds the interest rate cap, on the notional amount, which mirrors the scheduled principal balance of the 2013 Series B Bonds, through April 1, 2019. The State made no payment to the Bank under the terms of that agreement. The interest rate under the 2013 Series B Rate Cap Agreement is capped at 6.85%. At June 30, 2016, the fair value of the 2013 Series A and B Rate Cap Agreements was $57,075, and is estimated as the amount the Bank would receive to terminate the Rate

State Bond Rating (S & P/Moody's): AA/Aa2 or Higher AA-/Aa3 A+/A1 A/A2 A-/A3

Applicable Margins, 2013 Series A 1.00% 1.17% 1.37% 1.57% 1.82%

State Bond Rating (S & P/Moody's): AA/Aa2 or Higher AA-/Aa3 A/A1 A/A2 A-/A3

Applicable Taxable Margins2013 Series B 1.15% 1.32% 1.52% 1.72% 1.97%

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Cap Agreements at the reporting dates, taking into account current interest rates and the current credit worthiness of the counterparties. Repayment of the 2013 Series A and B Bonds shall be solely from i) appropriated funds, if any, made available and appropriated by the General Assembly of the State for bond payments, but not for payment of administrative expenses and ii) pledged receipts, which are the net proceeds derived from the sale, lease, transfer, conveyance, or other disposition of any interest in all or any portion of the I-195 land owned by the I-195 RDC. The I-195 RDC has pledged and granted to RICC a security interest, which has been assigned to the bond trustee, in all pledged receipts and all deposits in the bond, project, expense and credit facility funds established with the bond trustee. To the extent that the I-195 RDC has insufficient funds to meet its payment obligations under the bonds, it shall seek appropriations from the State; however, there are no assurances that the State will appropriate amounts to fund the I-195 RDC’s payment obligations. R.I. Turnpike and Bridge Authority

In 2016, with the approval of the State, the R.I. Turnpike and Bridge Authority (RITBA) issued 2016 Series A Motor Fuel Tax Revenue Bonds (2016 Bonds) in the amount of approximately $117.6 million. The 2016 Bonds were sold at a premium of approximately $16.3 million with total proceeds of approximately $134.2 million, of which $60 million was used to pay off a $60 million Bond Anticipation Note (BAN) entered into in 2014. The remaining proceeds are to be used to fund future capital renovations and repairs. The Series 2016 Bonds are fixed-rate bonds bearing interest rates ranging from 3% to 5% payable semiannually on October 1 and April 1. Principal payments are due annually, and interest payments semiannually commencing October 2016, until maturity in 2040.

At June 30, 2016, RITBA had revenue bonds outstanding with principal amounts totaling approximately $174 million.

Other Component Units

Nonmajor component units have various bonds outstanding. These revenue bonds were generally issued to fulfill the component unit’s corporate purpose. Additional information on each nonmajor component unit’s debt obligations is available in their audited financial statements.

C. Notes Payable


Notes payable (expressed in thousands) at June 30, 2016 are as follows:

Component Units -Rhode Island College note payable to the federal government with interest

at 5.5% payable in semi-annual installments of principal and interest through 2024. $ 1,128R.I. Resource Recovery note payable to the host municipality with an interest rate

of 1.4%, payable in equal installments over the next 13 years. 3,143R.I. Housing and Mortgage Finance Corporation bank notes and lines of credit,

0.72% to 6.25% interest, payable through 2056. 109,717

113,988Less: current portion (79,384)

$ 34,604

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D. Loans Payable


In June 2006, the R.I. Airport Corporation (RIAC), R.I. Commerce Corporation (RICC), and the R.I. Department of Transportation (RIDOT) executed a Secured Loan Agreement (Agreement) which provides for borrowings of up to $42 million with the United States Department of Transportation under the Transportation Infrastructure Finance and Innovation Act of 1998 (TIFIA). The purpose of the Agreement was to reimburse RICC and RIDOT and to provide funding to RIAC for a portion of eligible project costs related to the InterLink Facility Project. RIAC was permitted under the Agreement to make requisition of funds for eligible project costs through fiscal year 2013. RIAC began making monthly payments of interest in fiscal year 2012, with interest at a rate of 5.26%. Payments are made on behalf of RICC (the borrower per the Agreement), and debt service payments commenced in fiscal year 2012 with a final maturity in fiscal year 2042. Such repayments are payable solely from the net revenues derived from the InterLink. As of June 30, 2016, RIAC had approximately $41.5 million in borrowings under this agreement.

The remaining balance consists of loans payable by the University of Rhode Island and the Quonset Development Corporation of approximately $706 thousand and $4.5 million, respectively.

E. Obligations Under Capital Leases

Primary Government

The State has entered into capital lease agreements, primarily Certificates of Participation (COPS), with financial institutions. These financing arrangements have been used by the State to acquire, construct or renovate facilities and acquire other capital assets. The State’s obligation under capital leases at June 30, 2016 consists of the present value of future minimum lease payments less any funds available in debt service reserve funds. Obligation of the State to make payments under lease agreements is subject to and dependent upon annual appropriations being made by the General Assembly.

The following is a summary of material future minimum lease payments (expressed in thousands) required under capital leases that have initial or remaining non-cancelable lease terms in excess of one year as of June 30, 2016:

Each COPS transaction generally covers multiple capital projects supporting multiple functions of the primary government. In general, the amount of capital asset additions funded through COPS is equivalent to the amount of the issuance. The State reports the amortization charge on assets acquired through COPS with depreciation expense on the government-wide financial statements and discloses the amounts in Note 5, Capital Assets.

In May 2016, the State financed the acquisition of a voting equipment system in the amount of approximately $5 million under a capital lease agreement with a lender.

Total

$ 36,29831,12031,23231,35329,104

2022 - 2026 86,1462027 - 2031 10,751

Total future minimum lease payments 256,004Amount representing interest (46,704)

Present value of future minimum lease payments $ 209,300

201920202021

Fiscal YearEnding June 30

20172018

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When issuances also fund component unit projects, the State records the full lease under the obligation and recognizes the related receivable from the component unit for their portion of debt service in the government-wide financial statements.

Assets purchased with capital leases as of June 30, 2016 (expressed in thousands) are as follows:

F. Defeased Debt

The State and its component units have defeased certain general obligation bonds and revenue bonds by placing the proceeds of the new bonds or other sources in irrevocable trusts to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liabilities for the defeased bonds are not included in the basic financial statements.

At June 30, 2016, the following bonds outstanding (expressed in thousands) are considered defeased:

G. Conduit Debt

The R.I. Health and Educational Building Corporation has issued various series of revenue bonds, notes, and leases to finance capital expenditures for Rhode Island educational institutions, hospitals, and healthcare providers. The bonds, notes and leases are special obligations of the Corporation, payable from revenues derived solely from the institution for which the project was financed. The bonds, notes, and leases do not constitute a debt or pledge of the faith and credit of the corporation or the State, and accordingly are not reflected in the financial statements. The amount of conduit debt outstanding on June 30, 2016 was $3.1 billion.

The R.I. Industrial Facilities Corporation and the R.I. Commerce Corporation issue revenue bonds, equipment acquisition notes, and construction loan notes to finance various capital expenditures for Rhode Island business entities. The bonds and notes issued by the corporations are not general obligations of the corporations and are payable solely from the revenues derived from the related projects. They neither constitute nor give rise to a pecuniary liability for the corporations nor do they represent a charge against their general credit. Under the terms of the various indentures and related loan and lease agreements, the business entities make loan and lease payments directly to the trustees of the related bond and note issues in amounts equal to interest and principal payments due on the respective issues. The payments are not shown as receipts and disbursements of the corporations, nor are the related assets and obligations included in the financial statements. The amount of conduit debt outstanding on June 30, 2016 was $42 million and $991 million respectively, for these component units. Certain issues of conduit debt are moral obligations of the State, and the current amounts outstanding are disclosed in Note 12.

Category

Buildings $ 220,235 $ 52,490 $ 167,744Building Improvement 83,820 20,586 63,234Computer Systems 3,641 3,641Infrastructure 26,754 6,688 20,066Construction in Progress 61,533 61,533

$ 395,983 $ 83,406 $ 312,577

Cost

Accumulated

Depreciation

Net Book

Value

Primary government:General Obligation Bonds $ 347,730RI Refunding Bond Authority 13,518

Component Units:R.I. Depositors Economic Protection Corporation (ceased operations during FY04) 69,135R.I. Commerce Corporation 2,940R.I. Turnpike and Bridge Authority 6,255

Amount

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H. Job Creation Guaranty Program – Moral Obligations

The Job Creation Guaranty Program (JCGP) was established by the General Assembly in 2010 for the purpose of promoting economic development in the State and authorized the issuance of a maximum of $125 million of obligations by the RI Commerce Corporation (RICC), formerly known as the RI Economic Development Corporation.

In November 2010, RICC issued $75 million of taxable revenue bonds under the JCGP. The bond proceeds were loaned to 38 Studios, LLC (38 Studios) and provided funding for the relocation of the company’s corporate headquarters to the State and establishment and operation of a video gaming software development studio in Providence. Proceeds also were used to fund a Capital Reserve Fund and Capitalized Interest Fund. Amounts in the Capital Reserve Fund were to be used in the event that 38 Studios failed to make any required loan payments. In accordance with the enabling legislation and the agreement between RICC, the trustee and 38 Studios, should amounts in the Capital Reserve Fund fall below minimum requirements, RICC has agreed to present the Governor with a certificate stating the amounts required to restore any shortfall and the Governor is required to include such amounts in his or her budget request for appropriation by the General Assembly. The General Assembly may, but is not required to, appropriate such amounts.

38 Studios filed for Chapter 7 bankruptcy protection on June 7, 2012. On August 8, 2012, a federal judge allowed the assets to be liquidated through the state court in Rhode Island.

The total remaining debt service on the bonds will be approximately $61.8 million. The maturity dates on the bonds range from 2016 to 2020 with maximum annual debt service of approximately $12.5 million. The General Assembly made appropriations for fiscal years 2015 and 2016 to restore the shortfall in the Capital Reserve Fund. The fiscal year 2017 enacted budget includes an appropriation of approximately $2.5 million which will be used to pay the principal and interest on the bonds due in fiscal year 2017.

In November 2012, RICC sued various individuals and entities involved with the loan to 38 Studios including principals of 38 Studios, former employees of RICC and various advisors to RICC alleging fraud, negligence, breach of fiduciary duty and other charges. The suit seeks repayment of compensatory and punitive damages associated with the various counts identified in the lawsuit. A settlement was reached with two of the defendants and, after expenses, a net recovery of approximately $3.2 million was received in August of 2014. The net amount of the settlement was paid to the trustee for the benefit of the bondholders and was used to pay a portion of the fiscal year 2015 debt service.

In addition, subsequent to June 30, 2016, a Rhode Island Superior Court ruling upheld a settlement entered into by RICC with four named defendants in connection with Rhode Island Economic Development Corporation v. Wells Fargo, et al., pending in Providence Superior Court. The settlement will result in the gross payment of $12.5 million. After payments of fees, costs and expenses, the net amount from the settlement is expected to be approximately $9.9 million and will be paid to Bank of New York Mellon Trust Company, N.A., for the benefit of the bondholders of the “Rhode Island Economic Development Corporation’s Job Creation Guaranty Program series 2010 (38 Studios LLC Project)” bonds.

Also, on September 8, 2016, a Rhode Island Superior Court ruling upheld an initial settlement entered into by RICC with two named defendants in connection with Rhode Island Economic Development Corporation v. Wells Fargo, et al. pending in Providence Superior Court. The settlement will result in the gross payment of approximately $25.6 million. After payment of fees, costs and expenses, the net amount from the settlement is expected to be approximately $21.4 million and will be paid to Bank of New York Mellon Trust Company, N.A. for the benefit of the bondholders of the “Rhode Island Economic Development Corporation’s Job Creation Guaranty Program Series 2010 (38 Studios LLC Project)” bonds. In October 2016, RICC reached a settlement with the officers of 38 Studios for approximately $2,083,000. After related expenses, RICC netted $2,069,000 to be paid to Bank of New York Mellon Trust Company, N.A. for the benefit of the bondholders of the “Rhode Island Economic Development Corporation’s Job Creation Guaranty Program Series 2010 (38 Studios LLC Project)” bonds.

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The State has recorded a liability of $38.1 million relating to its moral obligation to the 38 Studios bondholders under the JCGP at June 30, 2016. This amount represents the current estimate of the amount of probable loss by the State and considers funds actually recovered as a result of the litigation discussed above. The $38.1 million, although recorded as a liability for financial statement purposes, is still subject to annual appropriation by the General Assembly. The estimated liability will be reduced in future years as the related debt is extinguished.

To the extent there are additional recoveries resulting from the lawsuit, such amounts, net of legal fees and other costs, would be available to reduce amounts, if any, appropriated by the State to fund the Capital Reserve Fund and pay debt service on the bonds.

The General Assembly repealed the authority for RICC to guarantee further loans under the JCGP during the 2013 legislative session.

I. Pollution Remediation Liabilities

GASB Statement No. 49 establishes guidance to estimate and report potential costs which may be incurred for pollution remediation liabilities. GASB 49 requires the reporting entity to reasonably estimate and report a remediation liability when one of the following obligating events has occurred:

• Pollution poses an imminent danger to the public and the reporting entity is compelled to take action.

• The reporting entity is in violation of a pollution related permit or license.

• The reporting entity is named or has evidence it will be named as a responsible party by a regulator.

• The reporting entity is named or has evidence it will be named in a lawsuit to enforce a cleanup.

• The reporting entity commences or legally obligates itself to conduct remediation activities.

The State and certain component units have remediation activities underway, and these are in stages including site investigation, planning and design, clean up and site monitoring. Several agencies within State government have as part of their mission the responsibility to investigate possible pollution sites and oversee the remediation of those sites. These agencies have the expertise to estimate the remediation obligations presented herein based on prior experience in identifying and funding similar remediation activities. The remediation liabilities reported have been calculated using the expected cash flow technique. Situations posing potential liabilities, for which a reasonable estimate could not be made, have not been included.

The remediation obligation estimates presented are subject to change over time. Cost may vary due to price fluctuations, changes in technology, changes in potential responsible parties, results of environmental studies, changes in laws or regulations, and other factors that could result in revision to the estimates. Recoveries from responsible parties may reduce the State’s obligation. As of June 30, 2016, no reasonable estimates of those recoveries can be made. Capital assets may be created when pollution remediation outlays are made under specific circumstances.

J. Compensated Absences

State employees and those of certain component units are granted vacation and sick leave in varying amounts based upon years of service. Additionally, the State has deferred payment of certain compensation to employees. A liability has been calculated for all earned vacation credits, subject to certain limitations, and vested sick leave credits that are payable at retirement, subject to certain limitations. Payment is calculated at the employees’ current rate of pay.

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K. Arbitrage Rebate

A liability accrues for income on the investment of debt proceeds determined to be arbitrage earnings in accordance with federal regulations. These amounts are generally payable to the federal government five years after the issuance date of the bonds.

L. Due to the Primary Government

This consists of the repayment of general obligation debt that was issued by the State on behalf of certain component units.

M. Other Long-Term Liabilities

Governmental Activities - the liabilities consist primarily of:

• Retainage related to infrastructure construction projects - these amounts are considered long-term liabilities since the related construction projects are not expected to be completed in the subsequent fiscal period.

In addition, certain other long-term payables are included in this category. Historically, long-term liabilities, other than debt, will be paid through certain funds as follows:

• Compensated absences – Assessed Fringe Benefits Fund, an internal service fund and the respective fund to which the underlying employee’s wages and benefits are charged.

• Pollution remediation – General, RI Capital Plan, and Intermodal Surface Transportation Funds.

• Other long-term liabilities – General and Intermodal Surface Transportation Funds.

Component Units – the liabilities consist primarily of landfill closure and post-closure costs and grants refundable.

Note 7. Net Position/Fund Balances


Restricted Net Position

The Statement of Net Position-Governmental Activities reflects $742.0 million of restricted net position, of which $438.2 million is restricted by enabling legislation, including $152.7 million of RI Capital Plan Funds. The remaining net position that is restricted by enabling legislation is included in the Employment Security Programs and Other categories on the Statement of Net Position. The principal component of the remaining balance of the restricted net position is unexpended bond proceeds.

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Governmental Funds – Fund Balances

Governmental fund balance categories are detailed below (expressed in thousands):

Article IX of the State Constitution requires the maintenance of a State Budget Reserve and Cash Stabilization Account (the Reserve) within the State’s General Fund. Section 35-3 of the General Laws specifically establishes the annual minimum balance requirements for the account. For fiscal year 2016, 3.0% of total general revenues and opening surplus are transferred to the Reserve. Amounts in the Reserve in excess of 5.0% of total general revenues and opening surplus are transferred to the RI Capital Plan Fund to be used for capital projects.

According to the State Constitution and related enabling laws the Reserve, or any portion thereof, may be appropriated by a majority of each chamber of the General Assembly, in the event of an emergency involving the health, safety or welfare of the citizens or to fund any unanticipated general revenue deficit caused by a general revenue shortfall in any given year.

Prior to fiscal year 2016 the Reserve was included in the Restricted category within fund balance. During fiscal year 2016 the State categorized the Reserve based on the guidance contained in GASB Statement No. 54 Fund Balance Reporting and Government Fund Type Definitions and the circumstances under which the Constitution and enabling laws allow the Reserve to be spent. The Reserve was reclassified to the Unassigned category of fund balance.

The State has not adopted any minimum fund balance requirements for any funds beyond the State Budget Reserve and Cash Stabilization Account within the General Fund.

See Note 1, Section S of these Notes for more information regarding the five categories of fund balance.

Governmental Funds - Fund Balance

General IST OtherFund Fund Funds Total

Fund Balances:Nonspendable:

Permanent Fund Principal $ $ $ 174 $ 174

Restricted for:Purposes specified by enabling legislation 133,193 133,193 RI Capital Plan 152,727 152,727 Debt Service 24,206 76,407 100,613 Capital Projects 72,015 72,015 Temporary Disability Insurance 152,285 152,285 Historic Tax Credit Redemption 59,959 59,959 Transportation-Infrastructure 72,613 72,613 Mission 360 Loan Program 1,776 1,776 Education 2,035 2,035 Other 664 664

Committed to:Transportation-Maintenance 39,063 39,063 Other 3,975 112 4,087

Assigned to:Subsequent Years Expenditures 132,153 132,153 Other 4,961 4,961

Unassigned:Budget Reserve and Cash Stabilization 191,581 191,581 Other 43,515 (1,519) 41,996

Totals $ 509,378 $ 136,139 $ 516,378 $ 1,161,895

Major Funds

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Note 8. Taxes

Tax revenue reported on the Statement of Activities is reported net of the allowance for uncollectible amounts and net of estimated refunds. Tax revenue on the Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds is reported net of estimated refunds, uncollectible amounts and the amount that will not be collected within one year (unavailable). The unavailable amount is reported as deferred inflows of resources. The detail of the general revenue taxes as stated on the Statement of Activities and the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances is presented below (expressed in thousands):

General FundPersonal Income $ 1,211,678 $ 1,211,419General Business Taxes:

Business Corporations 134,478 134,041Public Utilities Gross Earnings 103,062 103,040Financial Institutions 21,096 21,125Insurance Companies 124,145 124,407Bank Deposits 2,556 2,556Health Care Provider Assessment 43,236 43,249

Sub-total - General Business Taxes 428,573 428,418Sales and Use Taxes:

Sales and Use 971,873 972,106Motor Vehicle 39,692 39,692Motor Fuel (208) (195)Cigarettes 142,783 142,672Alcoholic Beverages 19,630 19,630

Sub-total - Sales and Use Taxes 1,173,770 1,173,905Other Taxes:

Inheritance and Gift 70,029 70,024Racing and Athletics 1,059 1,059Realty Transfer 10,431 10,446

Sub-total - Other Taxes 81,519 81,529Total - General Fund 2,895,540 2,895,271

Intermodal Surface Transportation FundGasoline 152,122 152,122RI Highway Maintenance 32,671 32,671

Other Governmental Funds 186,283 186,283Total Taxes $ 3,266,616 $ 3,266,347

Statement ofFunds Activities

Governmental

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Note 9. Transfers

Transfers for the fiscal year ended June 30, 2016 are presented below (expressed in thousands):

Note 10. Operating Lease Commitments

The primary government is committed under numerous operating leases covering real property. Operating lease expenditures totaled approximately $14 million for the fiscal year ended June 30, 2016. Most of the operating leases contain an option allowing the State, at the end of the initial lease term, to renew its lease at the then fair rental value. In most cases, it is expected that these leases will be renewed or replaced by other leases.

The following is a summary of material future minimum rental payments (expressed in thousands) required under operating leases that have initial or remaining lease terms in excess of one year as of June 30, 2016:

Governmental FundsMajor Funds

GeneralMajor Funds

Intermodal Surface Transportation $ 58,123 Debt service and operating assistanceNonmajor Funds

RI Temporary Disability Insurance 1,891 Administrative costHistoric Tax Credit 12,615 Tax credits claimed Bond Capital 305 Interest earnings transferRI Capital Plan 130 Capital expendituresCOPs 979 Current year excess income

Proprietary FundsLottery 369,761 Net income transferEmployment Security 167 Administrative cost

Total General 443,971Intermodal Surface Transportation

Bond Capital 3,470 Infrastructure fundingRI Capital Plan 11,930 Infrastructure funding

Total Intermodal Surface Transportation 15,400Nonmajor Funds

COPsGeneral 1,135 Debt service

RI Capital PlanGeneral 108,813 Transfer statutory excess in budget reserveBond Capital 1,717 Premium on new bonds

RI Public Rail CorporationIntermodal Surface Transportation 1,533 Operating assistance

Total nonmajor funds 113,198Total Governmental Funds 572,569Proprietary Funds

Lottery FundRI Capital Plan 444 Capital improvement

Convention CenterGeneral 22,968 Debt serviceRI Capital Plan 1,241 Capital improvement

Total Convention Center 24,209Employment Security

General 9,449 Residual surcharge transferTotal Proprietary Funds 34,102Total transfers primary government $ 606,671

DescriptionTransfers

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The minimum payments shown above have not been reduced by any sublease receipts.

Note 11. Commitments

Primary Government

The primary government is committed at June 30, 2016 under various contractual obligations for transportation infrastructure improvements, construction and renovation of buildings, software development and implementation, and other capital projects. A substantial portion of the cost of these projects will be reimbursed by federal grants, with the remainder principally financed with debt proceeds and Rhode Island Capital Plan Funds.

At June 30, 2016, the primary government had transportation infrastructure design, construction and other contract commitments of approximately $400 million, and contract commitments for the design, construction and renovation of buildings of approximately $154 million. At June 30, 2016, the primary government had software development and implementation contract commitments of approximately $50 million. These amounts include only purchase orders and related amendments generally processed through June 30, 2016. The State is also committed under multiple contracts for ongoing services which are not included in these commitment amounts.

The R. I. Public Rail Corporation (RIPRC), a special revenue fund, has obtained a letter of credit in the amount of $7.5 million in favor of AMTRAK to secure RIPRC’s performance of its obligations arising under any South County Rail Service agreements. RIPRC has been designated as the entity responsible for securing and maintaining liability insurance coverage to provide funds to pay all or a portion of the liabilities of the State, the MBTA, and AMTRAK for property damage, personal injury, bodily injury or death arising out of the South County Commuter Rail Service with policy limits of $200 million subject to a self-insured retention of $7.5 million.

Performance-based Agreements

The R.I. Commerce Corporation (RICC), on behalf of the State, entered into several agreements with the developer of the Providence Place Mall. The agreements state the terms by which the State shall perform with regard to a shopping mall, parking garage and related offsite improvements. The authority to enter into these agreements was provided in legislation passed by the General Assembly and signed by the Governor. This legislation further provided for payments to the developer through fiscal year 2021 of an amount equal to the lesser of (a) two-thirds of the amount of sales tax generated from retail transactions occurring at or within the mall or (b) $3.7 million in the first five years and $3.6 million in years 6 through 20. In the year ended June 30, 2016, $2.9 million was paid to the developer.

RICC has issued economic development revenue bonds whereby the State will assume the debt if the employer reaches and maintains a specified level of full-time equivalent employees. The participating employers have certified that the employment level has been exceeded, thereby triggering credits toward the debt. As a result, the State paid $3.3 million of the debt on the related economic development revenue bonds in fiscal year 2016. The State has commitments relating to this debt through fiscal year 2027.

Fiscal YearEnding June 30

2017 $ 13,3132018 10,9942019 10,4572020 7,6752021 6,985

2022 - 2026 27,923Total $ 77,347

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Rhode Island Lottery – Master Contract Agreements

Gaming Systems Provider – International Game Technology (IGT)

During May 2003, the Lottery entered into a 20-year master contract with its gaming systems provider granting them the right to be the exclusive provider of information technology hardware, software, and related services for all lottery games. This contract is effective from July 1, 2003 through June 30, 2023, and amends all previous agreements between the parties.

As consideration for this exclusive right, the gaming systems provider paid the Lottery $12.5 million. In the event that the contract term is not fulfilled, the Lottery will be obligated to refund a pro-rata share of this amount to the gaming systems provider ($4.4 million at June 30, 2016).

The contract mandates commission percentages ranging between 1.00% and 5.00% of lottery ticket sales and video lottery terminal income, depending on the amount of sales in each category.

On July 1, 2016, the Lottery entered into a Sixth Amendment to the Master Contract with IGT. Under this amendment, IGT will provide instant ticket printing services under the same terms and conditions as the Lottery’s most recent contract, including pricing, through June 30, 2023. In addition, IGT will provide a redesigned, enhanced website. By mutual agreement, IGT will provide courier service for the delivery of instant ticket products, four licensed instant ticket games, and the new website at no cost to the Lottery (total value of $2,691,000); and the Lottery will waive IGT’s obligations under Section 6.3 of the Master Contract (minimum employment mandates) through December 31, 2017.

Video Lottery Facility – UTGR, Inc. (Twin River)

On July 18, 2005, the Lottery entered into a five (5) year Master Video Lottery Terminal Contract with UTGR, Inc. (UTGR), the owners of Twin River, to manage one of the State’s licensed video lottery facilities. The contract entitles UTGR to compensation ranging from 26% to 28.85% of video lottery net terminal income at the facility. UTGR and the Lottery extended the contract and signed the first five-year extension term commencing on July 18, 2010. The second term commenced on July 18, 2015. Certain extensions are contingent on UTGR’s compliance with full-time employment mandates.

The Master Contract has been amended in recent years to reflect the statutory authorization of a promotional points program at Twin River. In fiscal 2016, Twin River was authorized and issued approximately $49 million in promotional points to facility patrons. The Master Contract has also been amended to reflect the statutory requirement that the Lottery reimburse UTGR for certain allowable marketing expenses.

Most recent statute and contract amendments require the Lottery to reimburse UTGR for allowable marketing expenses incurred between $4 million and $10 million, and between $14 million and $17 million, at the same percentage as the Lottery’s share of net terminal income for the fiscal year (60.88% for 2016). The Lottery reimbursed UTGR for $5,479,200 in marketing expenses for fiscal 2016.

Video Lottery Facilities – Premier Entertainment II, LLC (Newport Grand)

On November 23, 2005, the Lottery entered into a five (5) year Master Video Lottery Terminal Contract with Newport Grand to continue to manage one of the State’s licensed video lottery facilities. Newport Grand and the Lottery extended the contract and signed the first five-year extension term of the contract commencing on November 23, 2010. The second term, which commenced on November 23, 2015, is contingent on Newport Grand’s compliance with full-time employment mandates specified in the 2010 law. The contract, as amended, entitles Newport Grand to compensation equal in percentage of net terminal income to that of Twin River. In addition, Newport Grand is entitled to an increased percentage of net terminal income of 1.9% to be used for approved marketing expenses of Newport Grand.

The Master Contract has been amended in recent years to reflect the statutory authorization of a promotional points program at Newport Grand. In fiscal year 2016, Newport Grand was authorized and issued approximately $5.3 million in promotional points to facility patrons.

The Master Contract has also been amended to reflect the statutory requirement that the Lottery reimburse Newport Grand for allowable marketing expenses incurred between $560,000 and $1.4 million, at the same

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percentage as the Lottery’s share of net terminal income for the fiscal year (61.35% for 2016). The Lottery reimbursed Premier Entertainment II, LLC for $472,655 in marketing expenses for fiscal 2016.


R.I. Airport Corporation

As of June 30, 2016, RIAC is obligated for the completion of certain airport improvements under commitments of approximately $13.9 million, which are expected to be funded from current available resources and future operations.

R.I. Resource Recovery Corporation

Landfill closure and post-closure:

The EPA established closure and post-closure care requirements for municipal solid waste landfills as a condition for the right to currently operate them. The landfill operated by RIRRC has been segregated into six distinct phases. Phases I, II and III were closed by RIRRC in prior years, while Phase IV reached capacity during fiscal year 2012, with final capping completed during fiscal year 2014. In 2005, RIRRC began landfilling in Phase V, which is near capacity and has temporarily stopped accepting waste. As of December 2015, RIRRC began accepting waste in Phase VI.

A liability for closure and post-closure care of $69.8 million as of June 30, 2016 has been recorded in the statement of net position, as summarized by Phases below:

As of June 30, 2016, the remaining total estimated current cost to be recognized in the future as landfill closure and post-closure care expense, the estimated percent of landfill capacity used and the estimated remaining years for accepting waste are as follows:

As of June 30, 2016 RIRRC revised its estimate for future pollution remediation and landfill closure and post-closure care costs. The revised estimate resulted in an $11.1 million increase of the corresponding liability from $85.4 million at June 30, 2015 to $96.5 million at June 30, 2016 and was primarily attributable to improved leachate flow data.

Amounts provided for closure and post-closure care are based on current costs. These costs may be adjusted each year due to changes in the closure and post-closure care plan, inflation or deflation, technology, or applicable laws or regulations. It is at least reasonably possible that these estimates and assumptions could change in the near term and that the change could be material.

Included in restricted position held in trust in the statement of net position as of June 30, 2016 is $47.0 million placed in trust to meet the financial requirements of closure and post-closure care related to Phases II, III, IV, V and VI. RIRRC plans to make additional trust fund contributions each year to enable it to satisfy these and future costs.

Phase I $ 494,073 Phase II and III 8,178,942 Phase IV 10,088,063 Phase V 49,219,762 Phase VI 1,597,236 Other 215,274

$ 69,793,350

Year endedJune 30, 2016

Estimated Estimated Estimatedremaining costs capacity remaining years forto be recognized used accepting waste

Phase V $ 1,464,539 97.11% 3 monthsPhase VI $ 81,742,801 1.96% 22.7 years

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Pollution remediation obligations:

Amounts provided for pollution remediation obligations are based on current costs. These costs may be adjusted each year due to changes in the remediation plan, inflation or deflation, technology, or applicable laws or regulations. It is at least reasonably possible that these estimates and assumptions could change in the near term and that the change could be material.

The pollution remediation obligation for the year ended June 30, 2016 is as follows:

Superfund site:

In prior years, the EPA issued administrative orders requiring RIRRC to conduct environmental studies of the Central Landfill and undertake various plans of action. Additionally, in 1986, the Central Landfill was named to the EPA's Superfund National Priorities List.

During 1996, RIRRC entered into a Consent Decree with the EPA concerning remedial actions taken by RIRRC for groundwater contamination. The Consent Decree, which was approved by the U.S. District Court on October 2, 1996, required the establishment of a trust fund in the amount of $27 million for remedial purposes. The balance of the trust fund totaled $43.8 million as of June 30, 2016.

In 2004, RIRRC began the capping project for the Superfund site and continued to revise its estimates for leachate pretreatment costs and flows. RIRRC has recorded a liability for future remediation costs of approximately $26.9 million as of June 30, 2016.

R.I. Turnpike and Bridge Authority

During 2015, R.I. Turnpike and Bridge Authority entered into contracts totaling $26.8 million for steel repairs and the placement of the median barrier on the Claiborne Pell Bridge, which is expected to take over a year to complete. As of June 30, 2016, remaining commitments on these contracts total $8.6 million.

R.I. Public Transit Authority

The R.I. Public Transit Authority is committed under various contracts in the amount of $15.5 million at June 30, 2016.

University of Rhode Island, Rhode Island College, and the Community College of Rhode Island At June 30, 2016, the University of Rhode Island, Rhode Island College, and the Community College of Rhode Island had outstanding commitments for the construction and renovation of their buildings of approximately $27 million, $33 million, and $5 million, respectively. Other Component Units

Other component units have various commitments arising from the normal course of their operations. These commitments are not significant, overall, to the State’s financial statements.

Note 12. Contingencies

Litigation - Primary Government

The State, its departments, agencies, officers and employees are defendants in numerous lawsuits. For those cases in which it is probable that a material loss has or will occur and the amount of the potential judgment can be reasonably estimated or a settlement or judgment has been reached but not paid, the State has recognized a liability within its financial statements. Significant specific litigation is discussed below.

Balance, Balance, CurrentJune 30, 2015 Additions Reductions June 30, 2016 Portion

$ 21,184,244 $ 5,754,900 $ 0 $ 26,939,144 $ 1,411,611

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Challenges to Pension Reforms

Various legal challenges to enacted pension reforms initiated in recent years were settled in 2015. To carry out the settlement, the Rhode Island General Assembly passed legislation amending the Rhode Island Retirement Security Act (RIRSA), which was enacted into law on June 30, 2015 and which became generally effective July 1, 2015 (New RIRSA). On July 8, 2015, the Court entered final judgment.

Eight appeals were filed with respect to the final judgement entered in Rhode Island Public Employees’ Retiree Coalition v. Raimondo, and one appeal was filed with respect to the judgement in Clifford v. Chafee. Three of the nine appeals were dismissed by the Supreme Court. The State intends to vigorously defend the remaining six appeals. The appeals in the case do not affect the implementation of New RIRSA.

A lawsuit commenced by the Rhode Island Troopers Association challenging the constitutionality of the RIRSA (prior to the amendments) remains outstanding. The benefits at issue are those to be paid from the State Police Retirement Benefits Trust. There is no trial date set.

On March 16, 2016, the plaintiffs in Cranston Firefighters, IAFF Local 1363, AFL-CIO v. Chafee and International Brotherhood of Police Officers, Local 301, AFL-CIO v. Chafee filed a new suit in the United States District Court for the District of Rhode Island captioned Cranston Firefighters, IAFF Local 1363 AFL-CIO v. Raimondo. Through that action, the plaintiffs challenge the constitutionality of RIRSA and New RIRSA, not under the Rhode Island Constitution, as they had alleged in the Superior Court, but under the United States Constitution. Plaintiffs additionally seek a declaration concerning the effect of the class action on retirees. The State has moved to dismiss all counts in the Plaintiffs complaint. A hearing was held on that motion and the parties await a decision from the Court.

The State intends to vigorously defend these matters and cannot presently estimate the potential loss, if any.

United States v. RIDOC

The Department of Justice (DOJ) filed a federal civil rights action against the RI Department of Corrections (DOC or the State) on February 10, 2014 alleging a disparate impact in the selection process of entry level corrections officers for the time period of 2000 through 2014. The DOJ claims that the DOC has engaged in an unintentional pattern or practice of employment discrimination against African Americans and Hispanics through use of testing procedures used during the selection process for admission to the Training Academy for entry-level Correctional Officer positions. The DOJ is seeking injunctive relief, which would enjoin the DOC from using these examinations in the screening and selection process, and (among other measures) may seek “make whole” relief for individuals who were not hired as a result of the use of these examinations. This may involve relief in the form of back pay, seniority hiring, benefits, and retroactive hiring reaching back to 2000. The State’s Motion to Dismiss the individual “make whole” relief sought by the United States and limit the State’s potential liability was denied. The State’s interlocutory appeal was denied by the District Court. The parties have had settlement/mediation discussions that, based upon the request of the United States, are expected to resume. Fact discovery has closed; and, the case is now nearing the end of expert discovery that is set to close in April 2017. Since the case involves disputed facts, it is anticipated that a trial on the claim may be required in 2017 to resolve the issue of the State’s liability after the close of discovery.

Andrew C. (Previously Cassie M) v. Raimondo, EOHHS, and DCYF, USDC

Children’s Rights Incorporated (CRI) brought suit against the Governor, Secretary of EOHHS, and the Director of DCYF in their official capacities (the State) in 2007. The then R.I. Child Advocate sought to put the State’s foster care program administered by DCYF and EOHHS under federal court supervision through a class action seeking prospective relief. The State’s second Motion to Dismiss was granted in part and denied in part in 2011. The U.S. District Court ordered mediation in the fall of 2011 and again in 2013 that was not successful. After mediation failed, the Court determined that, instead of considering dispositive motions, the Court would hold a trial on the claims of the named Plaintiffs before reaching the issue of whether the case should continue by certifying a class. The trial of the individual claims of two remaining named Plaintiffs began on November 12, 2013. On January 9, 2014, after a sixteen day trial, Plaintiffs rested and the State promptly moved the Court to enter judgment on the record for all claims in the case. On April 30, 2014, the Court issued a Decision granting the State’s motion, and Judgment entered on the same day in favor of the State dismissing the case. The First Circuit Court of Appeals reversed the dismissal and returned the case to the Court.

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Children’s Rights Inc. has added new Plaintiff children and others have been dismissed from the case as their claims are moot. The named Plaintiffs have filed their Fourth Amended Complaint. Fact Discovery has commenced; however, the proceedings before the District Court have been stayed pending the outcome of an ongoing mediation. If mediation is unsuccessful, the State expects to resume fact and expert discovery leading to the issue of class certification.

The State of Rhode Island Department of Revenue and the Rhode Island Department of Administration v. Hewlett-Packard State & Local Enterprise Services, Inc.

On November 1, 2016, the State of Rhode Island Department of Revenue and the Rhode Island Department of Administration (the “State”) commenced suit against Hewlett-Packard State & Local Enterprise Services, Inc. (“HPE”) claiming, inter alia, that HPE had contracted to deliver to the State a fully functional computer system for the Rhode Island Division of Motor Vehicles on or before September 28, 2016 and that HPE breached the contract when it failed to deliver a fully functional computer system on time. The State also moved for a temporary restraining order, which the Court granted, enjoining HPE from ceasing work on the project. A preliminary injunction hearing is scheduled for January 5 – 12, 2017.

On December 5, 2016, HPE filed a counterclaim through which it alleges that the State owes it in excess of $14,000,000, plus interest and costs for work HPE performed in developing the computer system. HPE asserts claims for breach of contract, breach of the implied covenant of good faith and fair dealing, breach of implied contract, quantum meruit and promissory estoppel. The State has moved for judgement on the pleadings with respect to HPE’s claims for breach of implied contract, quantum meruit and promissory estoppel and the State intends to vigorously defend against HPE’s claims of breach of contract and breach of the implied covenant of good faith and fair dealing.

RI Department of Transportation (RIDOT) Consent Decree with the EPA

The RIDOT has entered into a Consent Decree with the EPA concerning violations of the Clean Water Act by failing to comply with the conditions in the General Permit – Rhode Island Pollutant Discharge Elimination System Storm Water Discharge from Small Municipal Separate Storm Sewer Systems. The Consent Decree was lodged with the U.S. District Court on October 15, 2015 and is was finalized on December 22, 2015. The Consent Decree requires RIDOT to implement remedial actions necessary in order to address discharges to impaired waters, illicit discharge detection and elimination, street sweeping pollution prevention and catch basin and other drainage system component inspection and maintenance. In addition to the remedial measures that must be implemented by RIDOT, RIDOT has paid a civil penalty in the amount of $315 thousand and complete two supplemental environmental projects that require the transfer of certain parcels of land for conservation purposes which have a value of $77 thousand and $158 thousand respectively. The Consent Decree also incorporates stipulated penalties for RIDOT’s failure to meet specific compliance deadlines.

Tobacco Master Settlement Agreement Related Matters

The State is a party to an arbitration proceeding brought by tobacco companies concerning the diligent enforcement of the escrow statute enacted in connection with the Tobacco Master Settlement Agreement (the “MSA”). The MSA is an agreement entered into between a number of states, including Rhode Island, and major tobacco companies in settlement of certain litigation. Additional information about these proceedings and other matters related to the outstanding debt of the Tobacco Settlement Financing Corporation, a blended component unit, are discussed below under the heading “Tobacco Settlement Financing Corporation”.

Other

The State is vigorously contesting all litigation matters including those detailed above. As of this date it is not possible to determine the outcome of certain proceedings and their overall impact on the State’s financial statements. The State is currently of the opinion that current litigation matters are not likely to result either individually or in the aggregate in final judgments against the State that would materially affect its financial position.

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Tobacco Settlement Financing Corporation

According to the Master Settlement Agreement (“MSA”), for any year in which the Participating Manufacturers (PMs) suffer a loss of market share of more than two percent as compared to their collective market share in 1997, there is the potential of a Non-Participating Manufacturer Adjustment (“NPM Adjustment”), which would permit the tobacco manufacturers to reduce their MSA payments for that year. Whether such an adjustment is applicable depends on whether (1) an economic firm jointly selected by the Settling States and the PMs determines that the disadvantages experienced by the PMs as a result of the provisions of the MSA were a “significant factor” contributing to the market share loss (“Significant Factor Proceeding”); and (2) the State is found to not have diligently enforced its statute. For calendar years 2003, 2004, 2005 and 2006, there have been four Significant Factor Proceedings in which the firm found in favor of the PMs. There will not be Significant Factor Proceedings for calendar years 2007 through 2014.

From April 2005 through April 2016, many of the tobacco manufacturers participating in the MSA either withheld all or portions of their payments due or remitted their payments to an escrow account, disputing the calculations of amounts due under the agreement. These manufacturers assert that the calculations of the amounts due failed to apply the NPM Adjustment. The total share of these disputed payments applicable to Rhode Island at June 30, 2016 (as calculated by the Independent Auditor) is approximately $50.7 million. This amount assumes the calculation by the Independent Auditor is correct. Thus, this calculation may be subject to recalculation and modification in the future.

In conjunction with its March 2015 bond issuance, the Corporation agreed with the Series 2007 Majority Interest Holder, on behalf of the Series 2007 bondholders, that to the extent that any funds on deposit in the disputed payments account on March 19, 2015 are received subsequently, the funds will be shared by the Corporation and the State in the following percentages: 70% to the Corporation and 30% to the State. It was further agreed that any such funds received by the Corporation will be used to retire Series 2007 bonds.

There has been a long-standing dispute between the PMs and the MSA Settling States relating to NPM Adjustment Disputes, and up until December 2012, all MSA Settling States and the PMs were engaged in an arbitration proceeding regarding the issue of Diligent Enforcement for calendar year 2003 (“2003 Dispute”). Rhode Island's diligence was ultimately not contested by the PMs after discovery closed during the arbitration related to the 2003 Dispute. As a result, Rhode Island received its share of DPA monies for the 2003 Dispute. In December 2012, the PMs reached a settlement agreement with certain MSA States & Territories (“Term Sheet States”) in connection with certain claims relating to NPM Adjustment Disputes, including the 2003 Dispute. The general terms thereof were memorialized in a Term Sheet (“Term Sheet”) with the PMs. In March of 2013, the Panel, which was convened for the 2003 Dispute, issued a Stipulated Partial Settlement and Award (“Award”) that incorporated certain provisions of the Term Sheet. Also, the Award included specific instructions to the Independent Auditor directing it to implement the provisions provided therein, which it did in preparing final calculations for the 2013 MSA payments.

Twenty-six (26) MSA States and Territories (“States and Territories”), including Rhode Island, have not accepted the terms of the Term Sheet or have not settled in some other fashion, so the NPM Adjustment disputes between these States and Territories and PMs remain unresolved. Future NPM Adjustments could be as large as or exceed the reported potential $1.2 billion calendar year 2003 NPM adjustment. The resolution of the substance of such disputes could take years. Moreover, there is no assurance that these funds will be collected by the Corporation in the future.

Due to these uncertainties regarding the ultimate realization of the remaining amount of these disputed payments, they have not been recognized as revenue in the accompanying financial statements. The Corporation and the other affected parties are taking actions prescribed in the MSA to arrive at a resolution of these matters.

An arbitration to resolve the issue of Diligent Enforcement to the 2004 NPM Adjustment Dispute has commenced. Although Rhode Island was ultimately not contested by the PM’s in the 2003 Dispute, there is no guarantee the 2004 Dispute will have the same result. If Rhode Island’s diligence is contested by the PMs and is found to be non-diligent by an arbitration panel, Rhode Island risks losing up to its entire MSA payment for 2004, which is roughly $45 million. Similar arbitrations will occur for each succeeding year, putting all MSA payments received by Rhode Island at risk. Any adverse judgement by an arbitration panel would be

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deducted from future MSA payments and would impair the Corporation’s ability to cover annual debt service payments on outstanding bonds.

In addition to NPM Adjustment arbitration, litigation has been filed alleging, among other claims, that the MSA violates provisions of the U.S. Constitution, state constitutions, federal antitrust and civil rights laws, and state consumer protection laws. These actions, if ultimately successful, could result in a determination that the MSA is void or unenforceable. `The lawsuits seek to prevent the states from collecting any monies under the MSA, and/or a determination that prevents the tobacco manufacturers from collecting MSA payments through price increases to cigarette consumers. In addition, class action lawsuits have been filed in jurisdictions alleging violations of state Medicaid agreements. To date, no such lawsuits have been successful. The enforcement of the terms of the MSA may continue to be challenged in the future. In the event of an adverse court ruling, the Corporation may not have adequate financial resources to service its debt obligations.

Lottery

The Lottery’s master contracts with its video lottery facility operators contain revenue protection provisions in the event that existing video lottery facility operators incur revenue losses caused by new gaming ventures within the State.

The Lottery’s gaming operations currently compete with casinos in nearby Connecticut and Massachusetts. In addition, both neighboring States have already approved or are considering additional casino expansion likely to increase gaming competition in New England. The Lottery and the State continually monitor the risk to gaming operations resulting from competition in nearby states.

A statewide and local referendum included on the ballot on November 8, 2016 for the relocation of Newport Grand to Tiverton, RI was approved by the voters. This new gaming facility is widely considered to be better positioned to compete with future gaming competition expected in nearby Massachusetts.

The Narragansett Indian Tribe filed a complaint against the State of Rhode Island in the Rhode Island Superior Court on or about September 28, 2011, challenging, inter alia, the constitutionality of the Rhode Island Casino Gaming Act (“Act”) on the grounds that it would not be "state-operated" and the Act "delegates unconstitutional authority to a private corporation.” On or about June 29, 2012, the Rhode Island Superior Court found that the Narragansett Indian Tribe had not sustained their burden of proof beyond a reasonable doubt that the Act is facially unconstitutional. The Narragansett Indian Tribe filed a notice of appeal of that decision with the Rhode Island Supreme Court. On or about March 4, 2015, the Rhode Island Supreme Court issued a decision upholding the Superior Court. The remaining issues in the case relating to whether the State “operates” Twin River and Newport Grand facilities remain pending in the Superior Court.

In the event of default on an insurance annuity contract for a Rhode Island winner of the Lucky for Life® jackpot prize award, the Lottery may be contingently liable for any remaining prize amounts due the winner.

Federal Grants

The State receives significant amounts of federal financial assistance under grant agreements which specify the purpose of the grant and conditions under which the funds may be used. Generally, these grants are subject to audit. The Single Audit for the State of Rhode Island for the fiscal year ended June 30, 2015 was issued in March 2016. That report identified approximately $1.4 million in questioned costs relating to the primary government.

The State has recently implemented a new integrated eligibility and benefits administration system known as the Unified Health Infrastructure Project (UHIP) for social service programs (e.g., Medicaid, SNAP, TANF, and Child Care). System development has largely been funded with federal grants. Implementation issues have resulted in increased oversight from the federal grantor agencies and requests for corrective action plans to address these issues.

In addition, a number of findings had potentially significant but unknown or unquantifiable questioned costs. The ultimate disposition of these findings rests with the federal grantor agencies, and, in most cases, resolution is still in progress. Adjustments are made to the financial statements when costs have been specifically disallowed by the federal government or sanctions have been imposed upon the State and the

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issue is not being appealed or the right of appeal has been exhausted. The fiscal 2016 Single Audit is in progress. It is anticipated that there will be additional questioned costs identified in that audit. The State’s management believes that any disallowances of federal funding received by the State will not have a material impact on the State’s financial statements.

Moral Obligation Bonds

Some component units issue bonds with bond indentures requiring capital reserve funds. Monies in a capital reserve fund are to be utilized by the trustee in the event scheduled payments of principal and interest by the component unit are insufficient to pay the bondholders. These bonds are considered “moral obligations” of the State when the General Laws require the executive director of the issuing agency to submit to the Governor the amount needed to restore each capital reserve fund to its minimum funding requirement and the Governor is required to include the amount in the annual budget.

R.I. Housing and Mortgage Finance Corporation (RIHMFC)

The R.I. Housing and Mortgage Finance Corporation (RIHMFC) had $65.7 million outstanding in bonds, which are secured in part by capital reserve funds which have aggregated to $24.4 million on June 30, 2016. Under the moral obligation provisions detailed in the preceding paragraph, upon request by the Governor, the General Assembly may, but is not obligated to, provide appropriations for any deficiency in such reserve funds. RIHMFC has never been required to request such appropriations. Such reserve funds relate solely to select multi-family issues of RIHMFC.

R.I. Commerce Corporation (RICC)

At June 30, 2016 in addition to the State’s moral obligation under the Job Creation Guaranty Program (JCGP) for the bonds discussed in Note 6 H, certain bonds secured by RICC’s capital reserve fund carry a moral obligation of the State. If at any time, certain reserve funds of RICC pledged fall below their funding requirements, a request will be made to the General Assembly to appropriate the amount of the deficiency. Additional outstanding moral obligations relating to these bonds total $24.1 million at June 30, 2016.

Component Units

R.I. Commerce Corporation (RICC)

On March 7, 2016, the Securities and Exchange Commission (SEC) filed a Complaint in the United States District Court of Rhode Island against RI Commerce Corporation and four other named defendants. The SEC is alleging that RI Commerce Corporation made materially misleading disclosures in connection with the issuance of bonds issued under the JCGP, in violation of Section 17(a)(2) and 17(a)(3) of the Securities Act. The SEC is seeking injunctive and monetary relief. RI Commerce Corporation is contesting the case vigorously. The likelihood of an unfavorable outcome and the amount or range of potential loss to RI Commerce Corporation, if any, is unknown.

R.I. Industrial-Recreational Building Authority (RIIRBA)

The R.I. Industrial-Recreational Building Authority (RIIRBA) is authorized to insure contractual principal and interest payments required under first mortgages and first security agreements issued to private sector entities by financial institutions and the Rhode Island Industrial Facilities Corporation (RIIFC), a component unit of the State, on industrial or recreational projects in the State up to a maximum of $60 million of outstanding principal balances under such insured mortgages and security agreements.

Losses, if any, are first payable from RIIRBA’s available resources. RIIRBA must then request appropriations of the General Assembly for any losses in excess of insured amounts. RIIRBA’s insurance guarantee is backed by the full faith and credit of the State.

At June 30, 2016, RIIRBA has insured contractual principal and interest payments required under first mortgages and first security agreements principally for land and buildings of manufacturing and distribution entities located throughout Rhode Island. Principal balances outstanding under first mortgages and first security agreements insured by RIIRBA at June 30, 2016 are $9.3 million.

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RIIRBA insures a bond issued by RIIFC on behalf of a private sector entity. During the year ended June 30, 2012 the private sector entity defaulted on its payments to the bond holder and RIIRBA assumed responsibility for making the debt payments. The payments are being made by first exhausting RIIRBA’s available financial resources. At June 30, 2016, RIIRBA has determined that it is likely that it will incur a loss under the insured commitment. RIIRBA has accrued an insured commitment payable of $1.9 million equal to the estimated loss at June 30, 2016. No request has been made to the General Assembly at June 30, 2016 for appropriations to satisfy any liability under the insurance guarantee.

R.I. Housing and Mortgage Finance Corporation (RIHMFC)

As of June 30, 2016, RIHMFC may borrow up to a maximum of $90 million under various revolving loan agreements expiring between August 2016 and January 2017. Borrowings under the lines of credit are payable on demand and are unsecured.

RIHMFC is a party to financial instruments with off-balance sheet risk in connection with its commitments to provide financing. Such commitments expose RIHMFC to credit risk in excess of the amounts recognized in the statements of net position. RIHMFC’s exposure to credit loss in the event of nonperformance by the borrowers is represented by the contractual amount of such instruments. Total credit exposure as a result of loan commitments at June 30, 2016 is $103.9 million.

Other Component Units

Other component units have various contingent liabilities that have arisen in the normal course of their operations. These contingencies are not significant to the State’s financial statements.

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Note 13. Employer Pension Plans

A. Summary of Employer Plans The State provides pension benefits for its employees through multiple retirement benefit plans as outlined below:

Employer pension expense and related liabilities and deferred inflows or resources/deferred outflows of resources for defined benefit plans A-D as identified above are recognized in the financial statements based on the provisions of GASB Statement No. 68.

Employer pension expense and related liabilities and deferred inflows/outflows for defined benefit plans E and F as identified above are recognized in the financial statements consistent with the provisions of GASB Statement No. 73 Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. The State provides these benefits on a pay-as-you-go basis rather than through an advance funding arrangement and a qualifying trust.

Plan Plan type Covered employeesFY 2016 pension expense

Net pension liability at

June 30, 2015 measurement

dateState employees excluding state police

and judges Governmental activities $216,904,000 $1,767,094,000 Business-type activities $1,896,000 $15,074,000 Special funding – teachers - state share (see Note Section 13-E)

$132,183,000 $1,117,395,000

B

State Police Retirement

Benefits Trust (SPRBT)

Single-employer defined benefit plan – advance funded through a trust

State Police hired after July 1,1987 $3,305,000 $6,001,000

C

Judicial Retirement

Benefits Trust (JRBT)

Single-employer defined benefit plan -– advance funded through a trust

Judges appointed after December 31, 1989 $1,740,000 $3,575,000

DRI Judicial

Retirement Fund Trust (RIJRFT)

Single-employer defined benefit plan - – advance funded through a trust

Covers 7 judges appointed prior to January 1, 1990 $1,286,000 $18,326,000

E

State Police Non-Contributory

Retirement Plan (SPNCRP)

Single employer defined benefit – non trusteed –

pay-as-you-go planState Police hired before July 1, 1987 $30,024,000 $266,091,000

F

Judicial Non-Contributory

Retirement Plan (JNCRP)

Single employer defined benefit – non trusteed –

pay-as-you-go plan

Judges appointed before January 1, 1990 who retired before July 1, 2012 $4,385,000 $52,018,000

Totals $391,723,000 $3,245,574,000

G

LIUNA – union plan for members

of the LIUNA bargaining units

Cost-sharing multiple employer defined benefit plan – “Taft-Hartley” non-

governmental plan

Members of the LIUNA bargaining unitNot applicable

(see note below)Not applicable

(see note below)

H ERS – Defined Contribution Plan

Multiple employer defined contribution plan

State employees subject to the “hybrid” defined benefit/defined contribution plan provisions

$4,418,000 Not applicable

I

FICA Alternative Retirement

Income Security Program

Single employer defined contribution plan

State employees not eligible to participate in the State’s other defined benefit plans

Not applicable Not applicable

AEmployees' Retirement

System (ERS )

Cost-sharing multiple-employer defined benefit plan – advance funded

through a trust

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The LIUNA sponsored, cost-sharing, multiple-employer pension plan (plan G) is not a state or local government pension plan. As there is no required employer contribution for covered employees, no employer pension expense is reflected in these financial statements. Consistent with the requirements of GASB Statement No. 78, there is no recognition of an employer proportionate net pension liability, if any.

Pension expense recognized for the defined contribution plans (H and I) – is recognized based on actual employer contributions required and made during the fiscal year consistent with the requirements of GASB Statement No. 68 regarding defined contribution plans. There is no required employer contribution to the FICA Alternative Income Security Program.

Plan membership, based on the June 30, 2014 actuarial valuations, is summarized in the table below:

B. Defined Benefit Plan Descriptions – Advance Funded Plans

EMPLOYEES’ RETIREMENT SYSTEM (ERS) - The ERS was established and placed under the management of the Retirement Board for the purpose of providing retirement allowances for employees of the State of Rhode Island under the provisions of chapters 8 to 10, inclusive, of Title 36, and public school teachers under the provisions of chapters 15 to 17, inclusive, of Title 16 of the Rhode Island General Laws.

Plan members - The plan covers most State employees other than certain personnel at the State colleges and university (principally faculty and administrative personnel). The plan also covers teachers, including superintendents, principals, school nurses, and certain other school officials in the public schools in the cities and towns as well as in certain charter schools. Membership in the plan is mandatory for all covered state employees and teachers. General officers may become members on an optional basis and legislators may participate if elected to office prior to January 1, 1995.

Certain employees of the Rhode Island Airport Corporation (hired before July 1, 1993), the Rhode Island Commerce Corporation (active contributing members and employees of the Department of Economic Development before October 31, 1995 who elected to continue membership) and the Narragansett Bay Commission (members of a collective bargaining unit) are also covered and have the same benefits as State employees.

Plan vesting provisions – after five years of service.

Terminated planmembers

entitled to butRetirees and not yet receiving Active Active Total bybeneficiaries benefits Vested Non-vested Plan

ERS-State Employees 11,103 2,898 8,652 2,649 25,302

JRBT 13 18 38 69

RIJRFT 7 7

SPRBT 26 25 42 208 301

JNCRP 57 57

SPNCRP 274 274

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Retirement eligibility and plan benefits – are summarized in the following table:

Schedule Schedule Criteria Retirement eligibility Benefit accrual rates Maximum benefit

(A) Completed 10 years of service on or before July, 1, 2005 and eligible to retire as of September 30, 2009

Age 60 with 10 years of service or after 28 years of service at any age

Effective until June 30, 2012: 1.7% for each of first ten years 1.9% for each of next ten years 3.0% for each of next fourteen years 2% for the 35th year Effective July 1, 2012: 1.0% per year Effective July 1, 2015: for members with 20 years or more of service as of July 1, 2012: 2% per year

80% of final average (3 consecutive highest years) earnings and 35 years of service

(AB) Completed 10 years of service on or before July, 1, 2005 but ineligible to retire as of September 30, 2009

Minimum retirement age of 62 and ten years of service with a downward adjustment of the minimum retirement age based on the years of service credit as of September 30, 2009

Effective until June 30, 2012: Same accrual rates as (A) above to September 30, 2009 and then Schedule B rates (below) thereafter Effective July 1, 2012: 1.0% per year

80% of final average (5 consecutive highest years) earnings

(B) Less than 10 years of service before July 1, 2005 and eligible to retire as of September 30, 2009

Age 65 with 10 years of service or after 29 years of service and age 59

Effective until June 30, 2012: 1.6% for each of first ten years 1.8% for each of next ten years 2.0% for each of next five years 2.25% for each of next five years 2.5% for each of next seven years 2.25% for the 38th year Effective July 1, 2012: 1.0% per year

75% of final average earnings (3 consecutive highest years) and 38 years of service

(B1) Less than 10 years of service before July 1, 2005 and ineligible to retire as of September 30, 2009

Age 65 with ten years of service, or age 62 with at least 29 years of service with a downward adjustment of the minimum retirement age based on the years of service credit as of September 30, 2009

Same as Schedule B


(B2) Less than 5 years of service as of July 1, 2012

Social Security Normal Retirement Age not to exceed age 67 and 5 years of contributory service

1.6% for each of first ten years Effective July 1, 2012: 1.0% per year


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State correctional officers may retire at age 50 with 20 years of service. However, if not eligible to retire as of September 30, 2009, the minimum retirement age was modified to 55 with 25 years of service credit for correctional officers and registered nurses at the Department of Behavioral Healthcare, Developmental Disabilities, and Hospitals.

The plan provides for survivor's benefits for service-connected death and certain lump sum death benefits.

Joint and survivor options are available to members. Vested members who have 10 or more years of contributing service credit on June 30, 2012, may choose to retire at a retirement eligibility date that was calculated as of September 30, 2009, if the member continues to work and make retirement contributions until that date. If the member chooses this option, their retirement benefits will be calculated using the benefit that they have accrued as of June 30, 2012 - members will accumulate no additional defined benefits after this date, but the benefit will be paid without any actuarial reduction.

State employees and public school teachers may retire with a reduced pension benefit if they have 20 years of service credit and they are within five years of their retirement date as prescribed in the Rhode Island Retirement Security Act (RIRSA). The actuarially reduced benefit will be calculated based on how close the member is to their RIRSA eligibility date.

Cost of Living Adjustments – The Cost of Living Adjustment (COLA) has been suspended until the collective ERS, SPRBT, and JRBT plans reach a funded status of 80%. The COLA provision can be reviewed in a four-year interval. When the collective funding level of the plans exceeds 80%, eligible retirees may receive a COLA annually effective on their date of retirement plus one month.

The COLA calculation is represented by the following formula: 50% of the COLA is calculated by taking the previous 5-year average investment return, less 5.5% (5yr Return – 5.5%, with a max of 4%) and 50% calculated using previous year’s CPI-U (max of 3%) for a total maximum COLA of 3.5%. This COLA is calculated on the first $25,855, effective January 1, 2016, and indexed as of that date as well. (The indexing formula is run annually regardless of funding level each year.) COLA will be delayed until the later of the Social Security Normal Retirement Age or three years after retirement.

Disability retirement provisions - The plan also provides nonservice-connected disability benefits after five years of service and service-connected disability pensions with no minimum service requirement. Effective for applications filed after September 30, 2009, accidental disability will be available at 66 2/3% for members who are permanently and totally disabled as determined by the Retirement Board. If the disability is determined to be partial and the member is able to work in other jobs, the benefit will be limited to 50%. Disability benefits are subject to annual review by the Retirement Board.

Other plan provisions - Service credit purchases, excluding contribution refund paybacks and military service, requested after June 16, 2009 are calculated at full actuarial cost.

JUDICIAL RETIREMENT BENEFITS TRUST (JRBT) - The Judicial Retirement Benefits Trust was established under Rhode Island General Laws 8-8.2-7; 8-3-16; 8-8-10.1; 28-30-18.1; and was placed under the management of the Retirement Board for the purpose of providing retirement allowances to Justices of the Traffic Tribunal, Supreme, Superior, Family, District and Workers Compensation courts.

Plan members – The plan covers all Judges appointed after December 31, 1989.

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Retirement eligibility and plan benefits – are summarized in the following table:

Retirement benefit

Judges appointed after December 31, 1989 but before July 2, 1997

75% of the final salary at the time of retirement after 20 years of service, or 10 years of service and attainment of age 65. Judges retiring after 20 years of service after age 65 or 15 years of service after age 70 receive full retirement benefits, which is the final salary at time of retirement.

Judges appointed after July 2, 1997 but before January 1, 2009

Same as above, except salary is the average highest three (3) consecutive years of compensation rather than final salary.

Judges appointed after January 1, 2009 but before July 1, 2009

Judges with 20 years of service after age 65 or judges with 15 years of service after age 70 will receive 90% of the average of the highest three consecutive years of compensation. Judges appointed on or after January 1, 2009 with 10 years of service and age 65 or 20 years of service at any age are entitled to a reduced benefit of 70% of the average highest three consecutive years of compensation.

Judges designating a survivor benefit with 20 years of service and age 65 or 15 years of service and age 70 receive a reduced benefit equal to 80% of the average highest three consecutive years of compensation. Judges designating a survivor benefit with 10 years of service after age 65 or 20 years of service at any age receive a reduced benefit equal to 60% of the average highest three consecutive years of compensation.

Judges appointed after July 1, 2009

Judges with 20 years of service after age 65 or with 15 years of service after age 70 will receive 80% of the average of the highest five consecutive years of compensation. Judges with 10 years of service and age 65 or 20 years of service at any age are entitled to a reduced benefit of 65% of the average highest five consecutive years of compensation.

Judges designating a survivor benefit with 20 years of service and age 65 or 15 years of service and age 70 receive a reduced benefit equal to 70% of the average highest five consecutive years of compensation. Judges designating a survivor benefit with 10 years of service after age 65 or 20 years of service at any age receive a reduced benefit equal to 55% of the average highest five consecutive years of compensation.

Certain survivor benefits are also provided to judges who are plan members, which is 50% of the benefit amount payable to the judicial member.



STATE OF RHODE ISLAND JUDICIAL RETIREMENT FUND TRUST (RIJRFT) - Effective July 1, 2012, under the direction of Rhode Island General Law 8-3-16, the retirement board established a trust to collect proceeds for the purpose of paying retirement benefits to participating judges or their beneficiaries.

Plan members – The plan covers seven (7) judges appointed prior to January 1, 1990. These members are active judges (as of June 30, 2012) appointed prior to January 1, 1990 who do not participate in the Judicial Retirement Benefit Trust. Prior to creating the trust, benefits for these members were intended to be funded

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on a pay-as-you-go basis. To the extent assets in the trust are insufficient to fund member benefits, the State would also fund retirement benefits on a pay-as-you-go basis as it does for sixty-five (65) retired judges and surviving beneficiaries who were not members of either judicial plan. The employee contribution rate is 12% of salary (except for members of the Supreme Court who contribute 8.75%).

Retirement eligibility and plan benefits – The plan generally provides retirement benefits for members who have served as a justice of the Supreme Court, the Superior Court, the Family Court, the District Court, or any combination of them for 20 years and have reached the age of 65 years, or have served 15 years, and reached the age of 70 years may retire from regular service and receive a benefit equal to the annual salary the justice was receiving at the time of their retirement. Members of the Traffic Tribunal who served as a justice for 20 years, or have served for 10 years and reached age 65 years may retire from regular service and receive a benefit equal to the 75% of the annual salary at the time of retirement. However, any Traffic Tribunal judge who has served 20 years and has reached age 65 years, or has served for 15 years and has reached age 70 years may retire from active service and receive a benefit equal to the annual salary the justice was receiving at the time of their retirement.



STATE POLICE RETIREMENT BENEFITS TRUST (SPRBT) - The State Police Retirement Benefits Trust was established under Rhode Island General Law Section 42-28-22.1 and was placed under the management of the Retirement Board for the purpose of providing retirement allowances to State Police.

Plan members – The plan covers all State Police and Superintendents hired after July 1, 1987.

Retirement eligibility and plan benefits – Prior to June 30, 2012 the plan generally provides retirement benefits equal to 50% of final salary after 20 years of service, plus 3.0% of final salary times service in excess of 20 years through 25 years to a maximum of 65% of final salary. Such benefits are available to members after 20 years of service regardless of age. The Superintendent of the State Police will receive 50% of his/her final salary and may retire after attainment of age 60 and 10 years of service.

The General Laws were amended such that any member of the State Police, other than the Superintendent, who is hired on or after July 1, 2007 and who has served for twenty-five (25) years shall be entitled to a retirement allowance of 50% of the final salary. In addition, any member may serve up to a maximum of 30 years and shall be allowed an additional amount equal to 3.0% for each completed year served after 25 years to a maximum retirement allowance not to exceed 65% of the final salary.

Benefits are based on the final base salary earned at retirement including longevity increment, holiday pay, clothing allowance and up to 400 overtime hours.

Effective July 1, 2012 State Police officers are eligible to retire once they have accrued a retirement benefit equal to 50% of their whole salary, with mandatory retirement once they have accrued a retirement benefit equal to 65% of their whole salary. State Police officers will earn a 2% accrual rate for each year of contributing service. Benefits will be calculated on the average of the highest five consecutive years of salary, including up to 400 hours of mandatory overtime service. Benefits accrued as of June 30, 2012 will be protected under the Rhode Island Retirement Security Act.

Cost of Living Adjustments – The Cost of Living Adjustment (COLA) has been suspended until the collective ERS, SPRBT, and JRBT plans reach a funded status of 80%. The COLA provision can be reviewed in a four-

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year interval. When the collective funding level of the plans exceeds 80%, eligible retirees may receive a COLA annually effective on their date of retirement plus one month.


Disability retirement provisions - The plan provides nonservice-connected disability benefits after 10 years of service and service-connected disability pensions with no minimum service requirement.

C. Defined Benefit Advance Funded Plans - Summary of Significant Accounting Policies The Fiduciary Net Position presented for defined benefit plans which are advance funded and accounted for in a trust has been determined on a basis consistent with that used by the respective plans in preparing their financial statements. ERS issues a publicly available financial report that includes financial statements and required supplementary information for the plans. The report may be obtained at http://www.ersri.org. The plans’ basis of accounting and accounting policies, including those related to benefit payments and valuation of plan investments is summarized below.

Basis of Accounting

The financial statements of the ERS are prepared on the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded when incurred. Plan member contributions are recognized in the period in which the wages, subject to required contributions, are earned for the performance of duties for covered employment. Employer contributions to each plan are recognized when due and the employer has made a formal commitment to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with the terms of each plan.

Disclosures regarding methods used to value investments and investment expenses are included in Note 2C, Pension Trusts.

D. Defined Benefit Plan Descriptions – Non-Contributory (pay-as-you-go) Pension Plans In addition to the defined benefit plans administered by the ERS, the State also administers two other non-trusteed single employer defined benefit pension plans that are closed to new members. The Judicial Non-Contributory Retirement Plan (JNCRP) provides retirement benefits to judges appointed before January 1, 1990 and who retired before July 1, 2012. The State Police Non-Contributory Retirement Plan (SPNCRP) provides retirement benefits to members of the State Police hired before July 1, 1987. Both plans were created by statute and have historically been funded by the State on a pay-as-you-go basis. Accordingly, no assets have been accumulated to pay benefits under these two non-trusteed plans.

Pension benefits paid under the JNCRP and SPNCRP are generally determined based on years of service at retirement and are payable to the retiree or their beneficiary. JNCRP members, in general, are eligible for full retirement benefits equal to their final annual compensation at age 65, if the member has served for 20 years, or at age 70 with 15 years of service. For SPNCRP members, in general, benefits are equal to 50% of salary after 20 years of service; for those who retired after July 1, 1972 an additional 3% annual increment is added until attaining a maximum benefit of 65% of salary after 25 years of service. Both plans have provisions that allow survivors, upon the death of the participant, to continue to receive a portion of the participant’s benefit.

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E. Special Funding Situation – ERS Plan – Teachers

The State is required by law to contribute 40% of the cost of providing retirement benefits for teachers covered by the Employees’ Retirement System. Under GASB Statement No. 68, for teachers, the State is considered to be a non-employer contributing entity under a special funding situation. The total net pension liability for teachers covered by the Employees’ Retirement System measured as of June 30, 2015 is approximately $2.8 billion and the State’ share of the net pension liability is approximately $1.1 billion. The State’s share of the net pension liability for teachers has been allocated based upon the statutory contribution percentage and is reflected in the Statement of Net Position as of June 30, 2016 as Net Pension Liability-Special Funding Situation. The State’s proportion for the special funding situation for the teachers covered in the ERS Plan was 40.59 percent, a decrease of 0.09 percent since the prior reporting period. Benefit provisions, contribution requirements, and other information related to the measurement and proportionate share of the net pension liability under a special funding situation for teachers are described in other sections of this Note relating to the ERS plan.

F. Contributions and Funding Policy Contribution requirements for plan members and participating employers are established pursuant to the Rhode Island General Laws. With the exception of the RIJRFT, employers are required by statute to contribute at an actuarially determined rate for the respective defined benefit plans.

The fiscal year 2016 contribution rates for the Employees’ Retirement System, the State Police Retirement Benefits Trust, and the Judicial Retirement Benefits Trust were based on the actuarial valuation of those plans performed as of June 30, 2013. The fiscal year 2016 actuarially determined contribution for the Judicial Retirement Fund Trust was also based on the actuarial valuation of that plan performed as of June 30, 2013. However, while members contribute to the RIJRFT, the State as employer, has not opted to make contributions. The non-contributory judges (JNCRP) and State Police (SPNCRP) plans are financed on a pay-as-you-go- basis.

A summary of the contribution rates by both the participating employers and members and the State’s annual pension plan contributions (expressed in thousands) for the fiscal year ended June 30, 2016 is provided in the table below:

ERS Plan Supplemental Contributions - The General Laws (Section 36-10-2(a) 1 and 2) also require, in addition to the contributions provided for by the funding policy, for each fiscal year in which the actuarially determined state contribution rate for state employees and teachers is lower than that for the prior fiscal year, the governor shall include an appropriation to that system equivalent to twenty percent (20%) of the rate reduction to be applied to the actuarial accrued liability. The amounts to be appropriated shall be included in the annual appropriation bill and shall be paid by the general treasurer into the retirement system. The retirement system's actuary shall not adjust the computation of the annual required contribution for the year in which supplemental contributions are received; such contributions once made may be treated as reducing the actuarial liability remaining for amortization in the next following actuarial valuation to be performed. For fiscal year 2016, no contribution to the System was required in accordance with this provision of the General Laws.

ERS JRBT RIJRFT* SPRBT JNCRP SPNCRP

Contribution rate: State 23.64% 26.80% $1,512 17.22% Plan members 3.75% and 11.00% 8.75% and 12.00% 8.75% and 12.00% 8.75% State contribution for teachers 8.98% to 9.41%Contributions made for state employees $144,696 $140 $4,005 $5,967 $17,501Contribution made for teachers $87,998

*- Actuarially determined contribution not expressed as a rate.

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The Retirement Security Act provides for additional contributions to the System based on 5.5% of the value of contracts where the services performed by the contractor were previously performed by state employees. A supplemental contribution of $408 thousand was paid to the System pursuant to Section 42-149-3.1 of the General Laws.

Employer contributions to the defined contribution plan are also prescribed by statute. In addition, plan member contributions for both the defined benefit and defined contribution plans are set by statute. Member and employer contribution rates can be changed by the General Assembly.

ERS Plan Special funding situation for local teachers - the State is required by law to contribute 40% of the cost of providing retirement benefits for teachers covered by the Employees’ Retirement System. Because the State deferred certain payments to the System in 1990/1991 and 1991/1992 the State’s actual share of the total annual contributions is approximately 40.7%. Under GASB Statement No. 68, for teachers, the State is considered to be a non-employer contributing entity under a special funding situation.

G. Net Pension Liability The net pension liability of the State and other participating employers in the Employees’ Retirement System – a multiple employer cost-sharing plan, has been apportioned based on the percentage share of total contributions made by each employer in fiscal year 2015. The State’s proportion for the ERS Plan for State employees was 88.96 percent, a decrease of 0.03 percent since the prior reporting period.

Following is a summary of the net pension liability of the State and other employers participating in the Employees’ Retirement System as well as the State’s liability related to the five single employer defined benefit plans it sponsors, all measured as of June 30, 2015 (expressed in thousands and excluding amounts related to teachers under the special funding arrangement discussed above):

Total Net Pension Liability - Employees' Retirement System (ERS) - State Employees $ 1,986,428

Less portion attributable to other entities:

Enterprise Fund - Rhode Island Lottery $ (15,074)

Discretely Presented Component UnitsUniversity of Rhode Island $ 113,016 Rhode Island College 39,783 Community College of RI 29,073 RI Division of Higher Education Assistance 2,954 RI Commerce Corporation 271 RI Airport Corporation 2,226

(187,323)

Related organization - Narragansett Bay Commission (16,937)

ERS - Net Pension Liability - Governmental Activities $ 1,767,094

Net Pension Liability - Single Employer Defined Benefit Pension Plans

JRBT 3,575 RIJRFT 18,326 SPRBT 6,001 JNCRP 52,018 SPNCRP 266,091

Total Net Pension Liability $ 2,113,105

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Further details regarding the State’s total pension liability and net pension liability for the single employer trusteed defined benefit pension plans (expressed in thousands) which was measured as of June 30, 2015 is presented below:

a. Actuarial assumptions used in determining total pension liability

The total pension liability was determined by actuarial valuations performed as of June 30, 2014 and rolled forward to June 30, 2015, using the following actuarial assumptions, applied to all periods included in the measurement.

The actuarial assumptions used in the June 30, 2014 valuations rolled forward to June 30, 2015 and the calculation of the total pension liability at June 30, 2015 were consistent with the results of an actuarial experience study performed as of June 30, 2013.

JRBT RIJRFT SPRBT

Total pension liability $ 63,085 $ 18,812 $ 120,907 Plan fiduciary net position 59,510 486 114,906 Net pension liability $ 3,575 $ 18,326 $ 6,001

Plan fiduciary net position as a percentage of total pension liability 94.3% 2.6% 95.0%

State Employees

Teachers JRBT RIJRFT SPRBT JNCRP SPNCRP

Valuation Date 6/30/2014 rolled forward to 6/30/2015

6/30/2014 rolled forward to 6/30/2015




6/30/2015 6/30/2015

Actuarial Cost Method

AssumptionsInvestment Rate

of Return 7.50% 7.50% 7.50% 3.80% 7.50% 3.80% 3.80%

Projected Salary 3.50% 3.50% 3.50% 3.50% 3.75% N/A N/AIncreases to to to

6.50% 13.50% 11.75%

Inflation 2.75% 2.75% 2.75% 2.75% 2.75% 2.75% 2.75%

Mortality

Cost of LivingAdjustments

maximum COLA of 3.5%.

ERS

Male employees: 115% of RP-2000 Combined Healthy For Males w ith White Collar adjustments, projected w ith Scale AA from 2000.

A COLA of 2% is assumed once every four years unitl the plan achieve 80% collective funded status, in accordance w ith the law .

Female employees: 95% of RP-2000 Combined Healthy For Females w ith White Collar adjustments, projected w ith Scale AA from 2000.

Male and Female Teachers: 97% and 92%, respectively of rates in a GRS table based on male and female teacher experience,

The COLA calculation has tw o components: 1) 50% of the COLA is calculated by taking the previous 5 year average investment

The COLA is to be applied to the f irst $25,000 of benefits, indexed over time. The COLA is delayed until the later of Social Security eligibility age or 3 years after retirement, except for State Police for w hich the COLA is delayed until the later of age 55 or

Entry Age Normal-the Individual Entry Age Actuarial Cost methodology is used

projected w ith Scale AA from 2000.

three years after retirement.

It is assumed the plan w ill not achieve the targeted 80% funded status for 15 years.

return, less 5.5% w ith a maximun of 4% and 2) 50% is calculated based on previous year's CPI-U(maximum of 3%) for a total

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Factors affecting trends for amounts related to the net pension liability

There were no changes in actuarial methods or assumptions reflected in the calculation of the net pension liability as of the June 30, 2015 measurement date compared to the June 30, 2014 measurement date except for the changes in assumption for the RIJRFT plan due to use of the municipal bond index rate of 3.8% compared to 4.29% used in the June 30, 2014 valuation.

Benefit changes, which resulted from the settlement of the pension litigation and the subsequent enactment of those settlement provisions by the General Assembly, are reflected in the calculation of the net pension liability at the June 30, 2015 measurement date. Significant benefit changes are summarized below:

• Employees with more than 20 years of service at July 1, 2012 will increase their employee contribution rates to 11% for state employees and participate solely in the defined benefit plan effective July 1, 2015 – service credit accruals will increase from 1% to 2% per year.

• Members are eligible to retire upon the attainment of: age 65 with 30 years of service, 64 with 31

years of service, or 62 with 33 years of service. Members may retire earlier if their RI Retirement Security Act date is earlier or are eligible under a transition rule.

• The COLA formula was adjusted to 50% of the COLA is calculated by taking the previous 5-year

average investment return, less the discount rate (5 year return – 7.5%, with a max of 4%) and 50% calculated using the previous year’s CPI-U (max of 3%) for a total max COLA of 3.5%. The COLA is calculated on the first $25,855, effective, 01/01/2016, and indexed as of that date as well.

• Other changes included providing interim cost of living increases at four rather than five year

intervals, providing a one-time cost of living adjustment of 2% (applied to first $25,000), two $500 stipends, and minor adjustments

The long-term expected rate of return best-estimate on pension plan investments was determined by the actuary using a building-block method. The actuary started by calculating best-estimate future expected real rates of return (expected returns net of pension plan investment expense and inflation) for each major asset class, based on a collective summary of capital market expectations from 23 sources. The June 30, 2015 expected arithmetic returns over the long term (20 years) by asset class are summarized in the following table:

These return assumptions are then weighted by the target asset allocation percentage, factoring in correlation effects, to develop the overall long-term expected rate of return best-estimate on an arithmetic basis.

Asset ClassTarget

allocationLong-term expected

real rate of returnGlobal Equity: 38% U.S. Equity 6.93% International Developed 7.32% International Emerging Markets 9.52%Equity Hedge funds 8% 3.98%Private Equity 7% 9.99%Core Fixed Income 15% 2.18%Absolute Return Hedge Funds 7% 3.98%Infrastructure 3% 5.70%Real Estate 8% 4.85%Other Real Return Assets: 11% Master Limited Partnerships 4.51% Credit 4.51% Inflation Linked Bonds 1.24%Cash, Overlay and Money Market 3% 0.78%

100%

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b. Discount rate

The discount rate used to measure the total pension liability of the plans was 7.5 percent for all plans except the RIJRFT, JNCRP and SPNCRP plans. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current contribution rate and that contributions from the employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

For the RIJRFT, JNCRP and SPNCRP plans, the State has not opted to make actuarially determined employer contributions and based on those assumptions, the pension plans’ fiduciary net position was not projected to be available to make all projected future benefit payments of current plan members. Consequently, for those plans, the municipal bond index rate, based on the 20-year Bond Buyer GO Index, (3.8% at June 30, 2015) was applied to all periods of projected benefit payments to determine the total pension liability.

c. Sensitivity of the net pension liability (asset) to changes in the discount rate

The following presents the net pension liability (asset) of the employers calculated using the discount rate of 7.5% (for all plans except the RIJRFT, JNCRP and SPNCRP), as well as what the employers’ net pension liability (asset) would be if it were calculated using a discount rate that is 1-percentage-point lower or 1-percentage-point higher than the current rate. The RIJRFT, JNCRP and SPNCRP plans’ fiduciary net position was not projected to be available to make all projected future benefit payments of current plan members and consequently the municipal bond index rate of 3.8% at June 30, 2015 was used in the determination of the net pension liability for those plans with a similar +1/-1 % sensitivity analysis (expressed in thousands):

Current1.00% Decrease Discount Rate 1.00% Increase

(6.50%) (7.5%) (8.50%)ERS - State employees 2,190,813$ 1,767,095$ 1,420,222$

ERS - Teachers (State share) 1,401,205$ 1,117,395$ 885,057$

JRBT 10,075$ 3,575$ (1,743)$

SPRBT 18,345$ 6,001$ (4,098)$

Municipal Bond1.00% Decrease Index Discount Rate 1.00% Increase

(2.80%) (3.80%) (4.80%)RIJRFT 20,197$ 18,326$ 16,796$

JNCRP 56,089$ 52,018$ 48,475$

SPNCRP 300,153$ 266,091$ 238,200$

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H. Changes in the Net Pension Liability Information on the State’s net pension liability for single employer plans is as follows (expressed in thousands):

*These two plans are non-trusteed plans which historically have been funded on a pay-as-you-go basis; therefore no assets have been accumulated and total pension liability and net pension liability are the same.

Total Pension LiabilityService Cost 3,024$ 416$ 4,198$ -$ -$

Interest 4,540 673 8,540 2,172 10,503

Benefit changes 253 - 1,170 -

Differences between expected and actual experience (2,857) (642) (3,522) 328 3,565 Changes of assumptions - 859 - 1,885 15,955 Benefit payments (1,809) (2,497) (6,020) (17,512)

Net change in Total Pension Liability 3,151 1,306 7,889 (1,635) 12,511 Total pension liability - beginning 59,934 17,506 113,018 53,653 253,580 Total pension liability - ending 63,085$ 18,812$ 120,907$ 52,018$ 266,091$

Plan Fiduciary Net PositionEmployer contributions 2,709$ -$ 3,433$ -$ -$ Employee contributions 1,121 159 1,732 - -Net investment income 1,368 9 2,656 - -Benefit payments (1,809) - (2,497) - -Administrative expenses (51) - (100) - -Other - - 4 - -

Net change in fiduciary net position 3,338$ 168$ 5,228$ -$ -$

Plan Fiduciary net position - beginning 56,172$ 318 109,678 - -Plan Fiduciary net position - ending 59,510$ 486$ 114,906$ -$ -$

Net Pension Liability 3,575$ 18,326$ 6,001$ 52,018$ 266,091$

RIJRFT SPRBT JNCRP* SPNCRP*JRBT

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I. Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources

Employees’ Retirement System of Rhode Island

For the fiscal year ended June 30, 2016 the State recognized pension expense of $216.9 million related to State employees who are covered by ERS. In addition, it recognized an Education expense of $132.2 million in the Statement of Activities relating to the State’s share of the pension expense for teachers who are covered by the ERS.

At June 30, 2016 the State reported deferred outflows of resources and deferred inflows of resources related to its participation in the ERS from the following sources (expressed in thousands):

The $144.7 million reported as deferred outflows of resources related to pensions resulting from State contributions to ERS subsequent to the measurement date will be recognized as a reduction in the net pension liability in the year ended June 30, 2017. In addition, the $88.0 million reported as deferred outflows of resources related to pensions resulting from State contributions to ERS for the teachers plan subsequent to the measurement date will be recognized as a reduction in the net pension liability in the year ended June 30, 2017. Other amounts reported as deferred inflows of resources related to pensions will be recognized in the determination of pension expense as follows (expressed in thousands):

StateEmployees Teachers Totals

Deferred Outflows of Resources

State contributions subsequent to the measurement date $ 144,696 $ 87,998 $ 232,694

Totals $ 144,696 $ 87,998 $ 232,694

Deferred Inflows of Resources

Differences between expected and actual experience $ 20,444 $ 7,276 $ 27,720

Changes of assumptions 13,295 30,039 43,334

Net difference between projected and actualearnings on pension plan investments 1,455 843 2,298

Changes in proportion and differences between employercontributions and proportionate share of contributions 428 2,148 2,576

Totals $ 35,622 $ 40,306 $ 75,928

StateEmployees Teachers

Year ended June 30:2017 $ (17,106) $ (11,939) 2018 (17,106) (11,939) 2019 (17,106) (11,939) 2020 15,696 9,329 2021 - (6,411) Thereafter - (7,407)

$ (35,622) $ (40,306)

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Other Single Employer Pension Plans

For the fiscal year ended June 30, 2016 the table below provides information about pension expense recognized for each of the State’s five single employer plans (expressed in thousands):

At June 30, 2016 the State reported deferred outflows of resources and deferred inflows of resources related to its participation in the single employer plans from the following sources (expressed in thousands):

The amount of $30.0 million reported as deferred outflows of resources, related to pensions resulting from State contributions to the single employer plans subsequent to the measurement date, will be recognized as a reduction in the net pension liability in the year ended June 30, 2017. Other amounts reported as deferred outflows/(inflows) of resources related to pensions will be recognized in the determination of pension expense as follows (expressed in thousands):

AnnualPension

Plan Expense

JRBT $ 1,740

RIJRFT 1,286

SPRBT 3,305

JNCRP 4,385

SPNCRP 30,024

JRBT RIJRFT SPRBT JNCRP SPNCRP Totals

Deferred Outflows of Resources

Employer contributions subsequent to the measurement date $ 2,410 $ 140 $ 4,005 $ 5,967 $ 17,501 $ 30,023

Change of assumptions - 53 - - - 53

Net difference between projected and actualearnings on pension plan investments 162 4 279 - - 445

Totals $ 2,572 $ 197 $ 4,284 $ 5,967 $ 17,501 $ 30,521

Deferred Inflows of Resources

Differences between expected and actual experience $ 2,390 $ 40 $ 3,196 $ - $ - $ 5,626

Change of assumptions 443 294 - - 737

Totals $ 2,833 $ 40 $ 3,490 $ - $ - $ 6,363

Year ending June 30, JRBT RIJRFT SPRBT JNCRP SPNCRP2017 (722)$ 14$ (645)$ $ $2018 (722) 1 (645) 2019 (722) 1 (645) 2020 16 1 772 2021 (465) (361)

Thereafter (56) (1,687) (2,671)$ 17$ (3,211)$ $ - $ -

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J. Defined Benefit Plan - LIUNA

All State employees who are members of the Laborers’ International Union of North America (LIUNA), in addition to participating in ERSRI, also participate in the LIUNA National Pension Fund (the Plan), a cost sharing multi-employer defined benefit plan subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), as amended. The Plan is administered by the Fund’s Board of Trustees. Eligibility and benefit provisions are defined in the Plan document adopted by the Board of Trustees. As of June 30, 2016, 843 employees of the State were members of the Plan.

All employees who are members of LIUNA are eligible to participate in the Plan. An employee is eligible for a regular pension if they have attained age 62, have five or more years of pension credits and have had at least one pension credit in a year after contributions paid to the Plan by an employer on their behalf began. Vesting of benefits is attained for participants who have five or more years of vesting service, at least one year of which was earned during the period in which the employer paid contributions to the Plan on behalf of the participant. Participants who pay their own contributions are immediately and fully vested in their accrued benefits, plus interest credited to their account. Benefit amounts for employees of the same age with the same years of service may be different because their employers’ contribution to the Pension Fund may have been at different levels. The Plan allows for an optional immediate 25% partial lump sum for all surviving spouses of participants who died pre-retirement with an actuarially reduced monthly benefit to be paid at age 55. Information regarding the Plan can be obtained from the Fund Office maintained by the Board of Trustees at the following address: Laborers’ International Union of North America National (Industrial) Pension Fund, 905 16th Street, N.W., Washington, DC 20006-1765, or at www.lnipf.org.

The contribution requirements of the State and employees are established by contract and may be amended by union negotiation. Employees are required to contribute $0.57 to $1.29 per hour up to a maximum of 1,820 hours per year to the Plan for calendar year 2016. The State is not required to contribute to the Plan.

The Multiemployer Pension Plan Amendments Act of 1980 imposes certain liabilities upon employees associated with multiemployer pension plans who withdraw from such a plan or upon termination of said plan. The State has no plans to withdraw or partially withdraw from the plan.

K. Defined Contribution Plan - ERS Plan Description - Employees participating in the Employees Retirement System (ERS) defined benefit plan with less than 20 years of service as of June 30, 2012, as described above, also participate in a defined contribution plan of the Employees’ Retirement System as authorized by General Law Chapter 36-10.3. The defined contribution plan is established under IRS section 401(a) and is administered by TIAA-CREF. The Retirement Board is the plan administrator and plan trustee. The employees (“members”) may choose among various investment options available to plan participants. The State Investment Commission is responsible for implementing the investment policy of the plan and selecting the investment options available to members.

Plan contributions - Members contribute 5% of their annual covered salary and employers contribute 1% to 1.5% of annual covered salary, depending on years of service as of June 30, 2012. Member contributions are immediately vested while employer contributions are vested after three years of contributory service. Contributions required under the plan by both the members and employers are established by the General Laws, which are subject to amendment by the General Assembly.

The State contributed and recognized as pension expense $4.4 million for the fiscal year ended June 30, 2016, equal to 100% of the required contributions for the fiscal year.

Plan vesting and contribution forfeiture provisions – The total amount contributed by the member, including associated investment gains and losses, shall immediately vest in the member’s account and is non-forfeitable. The total amount contributed by the employer, including associated investment gains and losses, vests with the employee and is non-forfeitable upon completion of three (3) years of contributory service. Non-vested employer contributions are forfeited upon termination of employment. Such forfeitures can be used by employers to offset future remittances to the plan.

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Retirement benefits – Benefits may be paid to a member after severance from employment, death, plan termination, or upon a deemed severance from employment for participants performing qualified military service. At a minimum, retirement benefits must begin no later than April 1 of the calendar year following the year in which the member attains age 70 ½ or terminates employment, if later.

The System issues a publicly available financial report that includes financial statements and required supplementary information for plans administered by the system. The report may be obtained at http://www.ersri.org.

L. Defined Contribution Plan - FICA Alternative Retirement Income Security Program

The State of Rhode Island FICA Alternative Retirement Income Security Program (the FARP) is a defined contribution (money purchase) plan that operates under Section 401(a) of the Internal Revenue Code. The FARP was established under Rhode Island General Law section 36-7-33.1 and was placed under the management of the State’s Department of Administration (DOA), which also serves as the FARP plan sponsor. The FARP took effect on December 15, 2013. TIAA-CREF serves as record keeper for the FARP, and FARP assets are held by J.P. Morgan as investment custodian.

Plan members – Eligible members of the FARP are any part-time, seasonal, or temporary employees of the State of Rhode Island, hired after July 1, 2013, who are ineligible for participation in the Employees’ Retirement System of Rhode Island (ERSRI). With the exception of the One-Time Opt-Out Provision described below, participation in the FARP is mandatory for these employees. Part-time, seasonal, or temporary employees hired prior to July 1, 2013, who do not participate in the ERSRI may opt to continue contributing to Social Security for the duration of their continuous employment.

One-time opt-out provision – The FARP contains a provision which allows a FARP-eligible employee, hired after July 1, 2013, to opt-out or elect to not participate in the FARP. An employee who opts to not participate will continue to make FICA contributions and the State will continue to make FICA contributions on behalf of the employee. An employee who opts to not participate in the FARP may subsequently, without penalty, choose to participate in the FARP; this election is irrevocable as long as the employee is a FARP-eligible employee.

Plan vesting provisions – The total amount contributed by the member, including associated investment gains and losses, shall immediately vest in the member‘s account and is non-forfeitable. The State does not make matching contributions to the FARP.

Member accounts – Each member’s account is credited with the member’s contribution and an allocation of the plan’s earnings. Allocations are based on a relationship of the member’s account balance in each investment fund to the total of all account balances in that fund. The retirement benefit to which a member is entitled is the benefit that can be provided from the member’s account.

Contributions – FARP benefits are funded by contributions from the participants as specified in RI General Law section 36-7-33.1. FARP participants make mandatory payroll deduction contributions to the FARP equal to 7.5% of the employee’s gross wages for each pay period.

Investment options – Member and employer contributions must be invested in one of the Vanguard Target Retirement Trusts, which are age-appropriate.

Retirement benefits – Benefits may be paid to a member after termination from employment, death, total disability, or upon attaining age 59 ½. In the case of termination, a 10% IRS penalty upon withdrawal will apply if the member is younger than 55 years of age. At a minimum, retirement benefits must begin no later than April 1 of the calendar year following the year in which the member attains age 70 ½ or terminates employment, if later.

M. Other Pension Plans – Component Units Certain employees of the University of Rhode Island, Rhode Island College and the Community College of Rhode Island (principally faculty and administrative personnel) are covered by individual annuity contracts

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under a defined contribution retirement plan. Eligible employees who have reached the age of 30, and who have two years of service are required to participate in either the Teachers Insurance and Annuity Association, the Metropolitan Life Insurance Company, or Variable Annuity Life Insurance Company retirement plan. Eligible employees must contribute at least 5% of their gross biweekly earnings. The University and Colleges contribute 9% of the employees’ gross biweekly earnings. Total expenses by the institutions for such annuity contracts amounted to approximately $17.4 million during the year ended June 30, 2016.

The Rhode Island Public Transit Authority has two single employer defined benefit pension plans that cover eligible employees. The first plan covers those in Amalgamated Transit Union (ATU) Division 618, ATU Division 618A, and Laborers’ International Union (LIU) Local 808. The second plan covers all other employees who work more than 1,000 hours per year. The plans provides retirement, disability and death benefits to plan members and beneficiaries. Benefits vest upon completion of ten years of service. Authority employees are eligible to retire upon attainment of normal retirement age (62, or if later, upon completion of 5 years of service). Retired employees are entitled to a monthly benefit for life as stipulated in the plan provisions. Employees are required to contribute 3% of their base salary to their respective plan each year until the earlier of the participant’s normal retirement date or termination of service. The remaining contributions to the plan are made by the Authority. At June 30, 2016 the plans’ total pension liabilities exceeded the plans’ fiduciary net position by an aggregate amount of $52 million. Accordingly, a net pension liability of that amount has been recorded as of June 30, 2016. For the fiscal year ended June 30, 2016 pension expense of $6.9 million was recorded related to the plans. Other information about the plans can be found in the audited financial statements of RIPTA which are available at www.ripta.com.

The Rhode Island Commerce Corporation (RICC) sponsors a cost sharing multiple employer pension plan for all employees, who were hired before January 1, 2006 who meet eligibility requirements. Eligible employees of Quonset Development Corporation, another component unit, who were hired before January 1, 2006 also participate in the plan. The plan provides retirement, disability and death benefits to plan members and beneficiaries. Benefits vest upon completion of five years of service. The plan assigns to RICC the authority to amend benefit provisions. At June 30, 2016, the plan’s total pension liability exceeded the plan’s fiduciary net position by $2 thousand. Accordingly, a net pension liability in that amount has been recorded as of that date. For the fiscal year ended June 30, 2016 pension expense of $117 thousand was recorded related to this plan. Other information about the plan can be found in the audited financial statements of RICC which are available at www.commerceri.com.

Certain other component units have defined contribution pension and savings plans. For information regarding these pension and savings plans, please refer to the component units' separately issued financial reports.

Note 14. Other Post-Employment Benefits

A. Plan Descriptions

The Rhode Island State Employees’ and Electing Teachers OPEB System (the System) acts as a common investment and administrative agent for post-employment health care benefits provided for the six groups/plans listed below:

• Certain state employees and employees of the following component units or related organizations: Narragansett Bay Commission, RI Airport Corporation and RI Commerce Corporation

• Certain certified public school teachers

• Judges

• State police officers

• Legislators

• Certain employees of the Board of Education (BOE)

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http://www.ripta.com/


Members of the System must meet the eligibility and service requirements set forth in RI General Laws or other governing documents. Although the assets of the six plans are commingled for investment purposes, each plan’s assets are accounted for separately and may be used only for the payment of benefits to the members of that plan, in accordance with the terms of that plan.

The System’s financial statements are included as Trust Funds within the Fiduciary Funds.

The OPEB Trust Funds are reported using the economic resources measurement focus and the accrual basis of accounting under which expenses, including benefits and refunds, are recorded when the liability is incurred. Employer contributions are recorded in the accounting period in which they are earned or become measureable.

Additional disclosure regarding the methods used to value investments and investment expenses are included in Note 2D, OPEB Trust Funds.

The System is administered by the State of Rhode Island OPEB Board and was authorized, created and established under Chapter 36-12.1 of RI General Laws. The Board was established under Chapter 36-12.1 as an independent board to hold and administer, in trust, the funds of the OPEB system. The Board began operations and the Trust was established effective July 1, 2010.

The System issues a publicly available financial report that includes financial statements and required supplementary information for the plans and a description of the benefit structures. The report may be obtained by writing to the State Controller’s Office, 1 Capitol Hill, Providence, RI 02908.

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A summary of the principal provisions of the plans follows:

RIGL Sections 16-17.1-1 and 2, 36-10-2, 36-12.1, 36-12-2.2 and 36-12-4 govern the provisions of the System, and they may be amended in the future by action of the General Assembly.

B. Funding Policy, Funding Status and Funding Progress

The contribution requirements of plan members, the State, and other participating employers are established and may be amended by the General Assembly. The State and other participating employers are required by law to fund the plans on an actuarially determined basis. For the fiscal year ended June 30, 2016, the State and other participating employers paid $53.4 million into the plans.

State Employees BOEand Teachers Judicial State Police Legislators Plan

Plan type Cost Sharing Multiple Employer Single employer Single employer Single employer

Cost Sharing Multiple Employer

EligibilityMembers of ERS meeting eligibility criteria. Retired judges.

Retired members of the State Police.

Retired legislators.

Members of the BOE Alternative Retirement Plan as defined in RI G.L. 16-17.1-1 and 2 meeting eligibility criteria.

Plan benefits

Retiree plan for members and dependents until Medicare eligible; subsequently eligible retirees access their benefits through a Health Reimbursement Account that the OPEB Trust makes a monthly deposit to based on years of service.

May purchase active employee plan for member and dependents until age 65.

Active employee plan for member and dependents until age 65; at that age coverage ceases if Medicare eligible.

May purchase active employee plan for member and dependents until age 65.

For employees retiring after June 21, 1998 the Board pays a portion of the post 65 Tier II benefits depending on the years of service and the retiree’s age. Those employees who retired previously have different benefits.

Other Retired teachers can purchase coverage for themselves and dependents at active or earlyretirement rate, as applicableuntil they are Medicare eligible.

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C. Annual OPEB Cost and Net OPEB Obligation

The participating employers recognized an expense equal to a) the annual required contribution of the employer (ARC), which was actuarially determined, plus b) interest on the net OPEB obligation at the beginning of the fiscal year, where applicable, less c) the ARC adjustment, where applicable (discounted present value of the OPEB liability at the beginning of the fiscal year). The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal costs each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.

The annual OPEB cost for the year, the amount actually paid on behalf of the plans and the changes in the net OPEB obligation are as follows (dollar amounts expressed in thousands):

State StateEmployee Teachers Judicial Police Legislators BOE

Date of Actuarial Valuation 06/30/13 06/30/13 06/30/13 06/30/13 06/30/13 06/30/13

Annual required contribution as a percent of payroll 5.97% N/A 0.00% 33.39% 1.53% 3.11%

Annual required contribution $ 40,709 $ 2,321 $ 0 $ 6,823 $ 27 $ 3,558

Plus: Interest on net OPEB obligation at beginning of year 0 N/A 0 426 0 0

Less: Adjustment to ARC 0 N/A 0 443 0 0

Annual OPEB cost 40,709 2,321 0 6,806 27 3,558

Participating State and/or other employer contributions 40,709 2,321 0 6,823 27 3,558

Decrease in OPEB obligation 0 0 0 (17) 0 0

Net OPEB obligation at beginning of year 0 0 0 8,520 0 0

Net OPEB obligation at end of year $ 0 $ 0 $ 0 $ 8,503 $ 0 $ 0

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The State’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plans, and the net OPEB obligation were as follows (dollar amounts expressed in thousands):

The table below displays the funded status of each plan at June 30, 2015, the most recent actuarial valuation date (dollar amounts expressed in thousands):

Covered payroll and the UAAL as a percentage of covered payroll are not presented for teachers since the required contribution by the State is for the Tier I subsidy for teachers who have elected to participate in the State’s Retiree Health Care Benefit Plan.

D. Actuarial Methods and Assumptions

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the

Percentage ofFiscal Annual OPEB

Plan Year Cost ContributedState Employees 2014 $ 49,072 100.00% -

2015 47,768 100.00% -2016 40,709 100.00% -

Teachers 2014 2,799 100.00% -2015 2,799 100.00% -2016 2,321 100.00% -

Judicial 2014 13 100.00% -2015 13 100.00% -2016 - 100.00% -

State Police 2014 7,874 99.56% 8,4852015 8,170 99.57% 8,5202016 6,806 99.99% 8,503

Legislators 2014 - N/A -2015 - N/A -2016 27 N/A -

BOE 2014 3,095 100.00% -2015 3,011 100.00% -2016 3,558 100.00% -

NetAnnual OPEB

OPEB Cost Obligation

Actuarial(Overfunded) UAAL as a

Funded Percentage ofRatio Covered Payroll

(a / b) ((b - a) / c)

State Employees $ 92,125 $ 622,826 $ 530,701 14.8% $ 682,965 77.7%Teachers 6,648 13,050 6,402 50.9% n/a n/aJudicial 2,826 756 (2,070) 373.8% 10,281 -20.1%State Police 22,920 78,857 55,937 29.1% 18,119 308.7%Legislators 2,469 1,317 (1,152) 187.5% 1,742 -66.1%BOE 14,608 69,106 54,498 21.1% 113,947 47.8%

UnfundedActuarial AccruedValue of

(b) (b - a)Assets - Entry Age - (UAAL)

(a) (c)Payroll

Liability (AAL) AAL Covered

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effects of short-term volatility in the actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedules of funding progress, presented as required supplementary information following the notes to the financial statements, show whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.

The accompanying schedules of employer contributions present trend information about the amounts contributed to the plans by employers in comparison to the ARC, an amount that is actuarially determined in accordance with the parameters of GASB Statement 43. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost for each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not exceeding thirty years.

The Annual Required Contributions for fiscal year 2016 were determined based on the June 30, 2013 valuations for all plans.

The following table summarizes the actuarial methods and assumptions used in the 2013 valuation:

Summary of Actuarial Methods and Assumptions as of June 30, 2013 valuation

Plan State

Employees

Teachers

Judicial State Police

Legislators

Board of Education

Plan Type

Cost sharing multiple

employer

Single

Employer

Single

Employer

Single

Employer

Single

Employer

Cost sharing

multiple employer


Individual Entry Age

Amortization Method

Level Percent of

Payroll

Level Dollar

Level Percent of

Payroll

Level Percent of Payroll

Level Percent of

Payroll

Level

Percent of Payroll

Equivalent Single Remaining Amortization Period

23 years closed

Determined by

statutory contribution

30 years open

23 years closed

30 years open

23 years closed

Asset Valuation Method

Four year smoothed market

Actuarial Assumptions

Investment Rate of Return 5.00%

Projected Salary Increases

3.50%

to

6.50%

NA 3.50%

3.50%

to

11.5%

3.75%

to

8.00%

3.50%

to

6.50%

Valuation Health Care Cost Trend Rate

9% in 2014, grading to 3.5% in 2023

Excise Tax Under the Patient Protection and Affordable Care Act

11.00%

Note: The actuarial assumptions do not include a separate general inflation rate assumption.

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As of the June 30, 2013 actuarial valuation, the UAAL was amortized over the remainder of a closed 30-year (or shorter) period from June 30, 2006. The remaining amortization period at June 30, 2013 was 23 years. The UAAL for teachers is being amortized is based on the statutory contribution, subject to statutory restriction. The remaining amortization period at June 30, 2013 for teachers was three years. Due to the current funding status of the Judges and Legislators plans, the amortization period is set to 30-year open.

The most recent actuarial valuations of the plans were performed as of June 30, 2015.

There have been changes in actuarial assumptions since the June 30, 2013 valuation. Certain actuarial assumptions for State Employees, Legislators, and Board of Education were updated to match the assumptions used for State Employees in the most recent pension valuation for the Employees’ Retirement System of Rhode Island (ERSRI). Changes were made to the following assumptions:

• Merit and longevity portion of the salary increase assumption

• Rates of separation from active membership

• Rates of retirement

• Rates of disability

In addition, the wage inflation was changed to 3.75% for State Police in order to match the most recent actuarial valuation of the State Police Retirement Benefits Trust.

The excise tax load on pre-65 liabilities was changed from 11.0% to 13.8%

The Patient Protection and Affordable Care Act includes an excise tax on high cost health plans beginning in 2020. The excise tax is 40% of costs above a threshold. The actual actuarial assumptions used in the most recent valuations assume that the plans will be subject to the excise tax in 2020.

The General Laws were amended in the 2013 session of the General Assembly to modify the manner in which health insurance is provided to Medicare eligible retirees covered under the System’s plan covering state employees. Effective October 1, 2014 the State established health reimbursement accounts (HRA) for each Medicare eligible retiree who elects to receive health insurance coverage through the state sponsored program. In addition, certain changes in benefits offered under the program are effective in July 2014 and January 2015. The effect on the Actuarial Accrued Liability resulting from these changes is reflected in the valuation table on the preceding page.

The table on the following page summarizes the actuarial methods and assumptions used in the most recent actuarial valuation.

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Summary of Actuarial Methods and Assumptions as of June 30, 2015 valuation

Plan State

Employees

Teachers

Judicial State Police

Legislators

Board of Education

Plan Type

Cost sharing

multiple employer

Single

Employer

Single

Employer

Single

Employer

Single

Employer

Cost sharing

multiple employer Actuarial Cost Method

Individual Entry Age

Amortization Method

Level Percent of

Payroll

Level Dollar

Level Percent of

Payroll

Level Percent of

Payroll

Level Percent of

Payroll

Level Percent of

Payroll

Equivalent Single Remaining Amortization Period

21 years closed

Determined by

statutory contribution

30 years open

21 years closed

30 years open

21 years closed

Asset Valuation Method

Four year smoothed market

Actuarial Assumptions

Investment Rate of Return 5.00%


3.50%

to

6.50%

NA 3.50%

3.75%

to

11.75%

3.50%

to

6.50%

3.50%

to

6.50%

Valuation Health Care Cost Trend Rate

9% in 2016, grading to 3.5% in 2025

Excise Tax Under the Patient Protection and Affordable Care Act

13.8%

Note: The actuarial assumptions do not include a separate general inflation rate assumption.

Certain other component units have other post-employment benefit plans. For information regarding these plans, please refer to the component units' separately issued financial reports.

Note 15. Deferred Compensation

The State offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The Department of Administration, pursuant to Chapter 36-13 of the General Laws, administers the plan. The Department of Administration contracts with private corporations to provide investment products related to the management of the deferred compensation plan. Plan distributions are normally available to employees at the later of age 59 or retirement and mandatory distributions must commence once the individual reaches age 70½. The plan also allows for distributions for qualifying events such as termination, death or “unforeseeable emergency.”

Current Internal Revenue Service regulations require that amounts deferred under a Section 457 plan be held in trust for the exclusive benefit of participating employees and not be accessible by the government or its creditors. The plan assets also may be held in annuity contracts or custodial accounts, which are treated as trusts.

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The State does not serve in a trustee capacity. Accordingly, the plan assets are not included in the State’s financial statements.

Note 16. Risk Management

The State is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; employee injury; and natural disasters.

The State has entered into agreements with commercial insurance companies for comprehensive insurance coverage, subject to certain deductibles, on State property to protect the State against loss from fire and other risks. Furthermore, the State is required by the General Laws to provide insurance coverage on all motor vehicles owned by the State and operated by State employees in the sum of $100 thousand per person and $300 thousand per accident for personal injury and $20 thousand for property damage. During fiscal year 2016, and the two preceding fiscal years, no settlements exceeded insured coverage limits.

The State also has a contract with an insurance carrier/administrator to provide health care benefits to active and certain retired employees. For coverage provided to active employees and retirees who are not eligible for Medicare, the State retains the full risk of loss. The State reimburses the administrator for the costs of all claims paid plus administrative fees.

The estimated liability for incurred but not reported (IBNR) claims at June 30, 2016 and June 30, 2015 was calculated based on historical claims data. The change in claims liability (expressed in thousands) is as follows:

The State is self-insured for risks of loss related to torts. Tort claims are defended by the State's Attorney General and, when necessary, appropriations are provided to pay claims.

The State is self-insured for various risks of loss related to work-related injuries of State employees. The State maintains the Assessed Fringe Benefits Fund, an internal service fund that services, among other things, workers' compensation claims. Funding is provided through a fringe benefit rate applied to State payrolls on a pay-as-you-go basis.

The State has entered into contracts with managed care health plans to share in either the aggregate risk (loss) or gain (profit) incurred by the plans over the course of the contract year. Managed care expenditures represent a relatively large portion of the State’s medical assistance expenditures.

Health Insurance Internal Service Fund

Unpaid claims $ 18,632 $ 230,129 $ 229,719 $ 19,042

Current YearLiability at Claims and Claim Liability at

July 1, 2014 IBNR Estimate Payments June 30, 2015Health Insurance Internal Service Fund

Unpaid claims $ 16,328 $ 221,513 $ 219,209 $ 18,632

Current YearClaim

PaymentsLiability at

June 30, 2016Liability at

July 1, 2015Claims and

IBNR Estimate

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Note 17. Other Information A. Elimination Entries

When the governmental fund statements and the internal service fund statements are combined into one column for governmental activity on the government-wide financial statements, interfund balances and activity should be eliminated. The following are the eliminations (expressed in thousands) that were made:

B. Related Party Transactions

The State has transferred custody, control and supervision of the Jamestown and the Sakonnet River Bridges and related land and improvements from the Department of Transportation to the R.I. Turnpike and Bridge Authority (RITBA). While maintenance responsibilities for the two bridges rest with RITBA, ownership and title remains with the State.

The R.I. Industrial-Recreational Building Authority is authorized to insure mortgages and first security agreements granted by financial institutions and the R.I. Industrial Facilities Corporation for companies conducting business in the State.

The State entered into a lease and operating agreement (the agreement) with the R.I. Airport Corporation (RIAC) whereby the State has agreed to lease various assets to RIAC. The agreement requires RIAC to reimburse the State for principal and interest payments for certain airport-related General Obligation Bonds. The term of the agreement is 30 years beginning July 1, 1993, with annual rent of $1.00. In the event RIAC

AssetsDue from other funds $ 5,385 $ 1,023 $ 6,408 $ (4,280) $ 2,128Loans to other funds 114,731 114,731 (114,731)

Total assets $ 120,116 $ 1,023 $ 121,139 $ (119,011) $ 2,128

LiabilitiesDue to other funds $ 2,340 $ 1,940 $ 4,280 $ (4,280) $Loans from other funds 108,821 5,910 114,731 (114,731)

Total liabilities $ 111,161 $ 7,850 $ 119,011 $ (119,011) $

Program revenueGeneral government $ $ 302,392 $ 302,392 $ (302,392)Public safety 12,502 12,502 (12,502)

ExpensesGeneral government (301,322) (301,322) 301,322Public safety (13,572) (13,572) 13,572

Net revenue (expenses) $ $ $ $ $

TransfersTransfers in $ 572,569 $ $ 572,569 $ (236,804) $ 335,765Transfers out (236,804) (236,804) 236,804

Net transfers $ 335,765 $ $ 335,765 $ $ 335,765

Assets

Due from other funds $ 713 $ $ 713 $ (2,841) $ (2,128)

Total assets $ 713 $ $ 713 $ (2,841) $ (2,128)

LiabilitiesDue to other funds $ 2,841 $ $ 2,841 $ (2,841) $

Total liabilities $ 2,841 $ $ 2,841 $ (2,841) $

TransfersTransfers in $ 34,102 $ $ 34,102 $ (34,102) $Transfers out (369,867) (369,867) 34,102 (335,765)

Net transfers $ (335,765) $ $ (335,765) $ $ (335,765)

InternalTotal Eliminations Balances

Business-typeActivities

Total

Total

Internal

Eliminations BalancesGovernmental Service

Funds FundsInternal

Total

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does not have sufficient funds to make the required lease payments when due, the amount is payable in the next succeeding fiscal year and remains an obligation of RIAC until paid in full. The State has no rights to terminate the agreement as long as there are bonds and subordinate indebtedness outstanding.

The State has transferred land reclaimed from the Interstate 195 relocation project and the Washington Bridge project to the I-195 Redevelopment District Commission (I-195 RDC). The value of the land was reported in the State’s financial statements as a capital contribution at the historical cost of $343 per acre, for a total of $7,203. Significant improvements to the land are being funded by the State to complete redevelopment of the land for sale. In April 2013, the R.I. Commerce Corporation (RICC) issued conduit debt obligations on behalf of the I-195 RDC totaling $38.4 million.

During fiscal 2016, the General Assembly appropriated $25 million to the I-195 RDC to fund various economic development initiatives associated with the sale of the I-195 RDC land. The voters of Rhode Island authorized the issuance of $30 million in general obligation debt for the construction of a new residence hall at Rhode Island College (RIC). Of this amount, $20 million will be repaid to the State. The residence hall was finished and in service by September 2007, at which time RIC began collecting revenues to pay for its share of the debt service. Debt service obligation is to be split two-thirds to RIC and one-third to the State for all payments after September 2007. RIC will repay the State for the debt service paid on its behalf on a straight-line basis, amortized over the remaining life of the bonds, which carry rates ranging from 3% to 5% and a life of nineteen years beginning in fiscal year 2009.

Under an agreement with AllianceBernstein, the administrator of the CollegeBoundfund operated by the R.I. Higher Education Savings Trust, the State received asset-based fees from AllianceBernstein and direct purchase commissions from direct purchases by certain non-Rhode Island residents. The total amount received during fiscal year 2016 was $8,446,261. In addition, the State accrued a receivable of $1,446,270 from AllianceBernstein at June 30, 2016 for amounts earned in fiscal year 2016.

During fiscal 2016, the State created the School Building Authority Fund program to address high priority school building projects in communities with limited resources. Certain administrative duties related to the management and custody of monetary assets of the program were assigned to the Rhode Island Health and Educational Building Corporation (RIHEBC), including establishing a trust to hold related monies, creating and maintaining program accounting records, and the distribution and management of awards. Approved awards can be loans, grants or a combination of both. An appropriation of $20 million was made to RIHEBC to fund the program. Funding is expected to continue through annual appropriations from the legislature, loan repayments, bond refinance interest savings and other payments received by RIHEBC pursuant to finance agreements with cities, towns and local education agencies. The Municipal Road and Bridge Revolving Fund was created within the Rhode Island Infrastructure Bank (RIIB) to provide municipalities with low-cost financial assistance for road and bridge projects. State statute requires RIIB to administer the financial components of the fund and requires the RI Department of Transportation to receive, review and rank municipal road and bridge projects submitted for funding consideration on an annual basis. R. I. Commerce Corporation received various state appropriations totaling approximately $27 million during fiscal 2016 to fund various economic development initiatives on behalf of the State.

C. Budgeting, Budgetary Control, and Legal Compliance

Budget Preparation

An annual budget is adopted on a basis consistent with generally accepted accounting principles. The budget encompasses the General, Intermodal Surface Transportation and Temporary Disability Insurance Funds as well as selective portions of certain other funds. Preparation and submission of the budget is governed by the State Constitution and the Rhode Island General Laws. The budget, as enacted, contains a complete plan of proposed expenditures from all sources of funds (general, federal, restricted, and transfers in). Revenues upon which the budget plan is based are determined as part of the State’s Revenue Estimating Conference.

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The Conference, held twice each year, results in a consensus estimate of revenues for the next fiscal year and an update of prior revenue estimates for the current fiscal year.

As required by the Constitution and the Rhode Island General Laws, annual appropriations are limited to 97.0 percent of estimated general revenues. The remaining 3.0 percent is contributed to the Budget Reserve Account until such account equals 5.0 percent of total general revenues and opening surplus. Excess contributions to the Budget Reserve Account are transferred to the Rhode Island Capital Plan Fund to be used for capital projects.

The annual budget is adopted on a comprehensive basis and includes activity that, for financial reporting purposes, is recorded in multiple funds. Consequently, the budgetary comparison schedules for an individual fund include amounts in the “actual” column that have no corresponding budget amount. These amounts are principally interfund transfers which are not included in the comprehensive budget to avoid duplication but are appropriately reflected in the individual fund financial statements.

The State’s budget documents may be accessed at the following website: http://www.omb.ri.gov/budget.

Budgetary Controls

The legal level of budgetary control, i.e., the lowest level at which management (executive branch) may not reassign resources without special approval (legislative branch), is the line item within the appropriation act. Management cannot reallocate any appropriations without special approval from the legislative branch.

Budgetary controls utilized by the State consist principally of statutory restrictions on the expenditure of funds in excess of appropriations, accounting system controls to limit expenditures in excess of authorized amounts, and budgetary monitoring controls.

D. Significant Transactions with Component Units

The significant transactions with the discretely presented component units are presented (expressed in thousands) below:

Description

Governmental activitiesGeneral

University of Rhode Island $ 72,359 Operating assistanceRhode Island College 44,861 Operating assistanceCommunity College of Rhode Island 47,809 Operating assistanceCentral Falls School District 46,371 Operating assistanceThe Met 11,234 Operating assistanceI-195 District Commission 25,845 Operating assistanceR.I. Commerce Corporation 40,324 Operating and capital assistanceR.I. Division of Higher Education Assistance 8,028 Operating assistanceR.I. Health and Education Building Corporation 63,864 School Building Authority Capital Fund/debt service

ISTR.I. Public Transit Authority 46,792 Operating assistanceR.I. Turnpike and Bridge Authority 15,677 Infrastructure improvements

Bond CapitalUniversity of Rhode Island 15,605 Construction, improvement or purchase of assetsRhode Island College 11,092 Construction, improvement or purchase of assetsR.I. Infrastructure Bank 9,930 Infrastructure improvements and bond proceeds

R. I. Capital PlanUniversity of Rhode Island 18,190 Construction, improvement or purchase of assetsRhode Island College 8,165 Construction, improvement or purchase of assets

Total Governmental Activities $ 486,146

Significant transactions between primary government and component unitsExpense

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E. Individual Fund Deficits

The following Internal Service Funds had cumulative fund deficits at June 30, 2016:

• Central Utilities ($11 thousand) • State Telecommunications ($563 thousand) • Records Center ($215 thousand) • Capitol Police ($48 thousand)

The deficits will be eliminated through charges for services in fiscal year 2017.

F. Restatements – Net Position

Restatements of beginning net position (expressed in thousands) are in the following table:

1) Effective July 1, 2015, the RI Higher Education Assistance Authority, previously a discretely presented component unit, was dissolved and its operations were assumed by the newly created Division of Higher Education Assistance (the Division) within the Office of the Commissioner of Post-Secondary Education. The State’s fiscal 2016 financial statements include the Division as a discretely presented component unit. Beginning net position was decreased for the net position of the RI Higher Education Assistance Authority which ceased operations on June 30, 2015. A fiscal 2016 special item reflects the transfer of net position to the new Division.

2) The Rhode Island Higher Education Savings Trust (the Trust) , a private purpose trust, which had a beginning fiduciary net position of $7.4 billion, was previously a fiduciary component unit of the RI Higher Education Assistance Authority but not included within the State reporting entity. Pursuant to legislation enacted by the General Assembly in the 2015 session, responsibility for oversight of the Trust was transferred to the General Treasurer effective July 1, 2015 and the Trust’s financial statements are now included as a fiduciary (private purpose trust) fund.

3) Implementation of new State programs administered by quasi-public entities, which were previously considered related State organizations, resulted in reconsideration of those entities as component units for fiscal 2016 consistent with generally accepted accounting principles. The RI Infrastructure Bank and RI Health and Education Building Corporation with beginning net position of $541.7 million and $12.0 million, respectively, have been included as discretely presented component units for fiscal 2016.


Proprietary and Business-type

Activities

Discretely Presented

Component UnitsFiduciary Private Purpose Trusts

Balances previously reported at June 30, 2015

Net position (596,579)$ 72,414$ 1,744,190$ 2,655$

Restatement due to:

1) Transfer of the functions of the previous RI Higher Education

Authority to the newly created Division of Higher Education

Assistance (38,348)

2) Inclusion of the RI Higher Education Savings Trust

as private purpose trust fund of the State 7,417,315

3) Changes in the reporting entity 553,698

4) Correction of errors (net) (365) 261

5) Adjustments to capital assets (7,689)

July 1, 2015 net position, as restated (604,633)$ 72,414$ 2,259,801$ 7,419,970$

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4) The governmental activities had a correction of an error, related primarily to the carrying value of certain assets. In addition, the correction of an error in the discretely presented component units relates primarily to the adjustment of the carrying value of certain assets and liabilities of two component units – the Met School (opening net position decreased $92 thousand) and the Central Falls School District (opening net position increased $353 thousand).

5) A net decrease of $7.7 million was recorded to opening net position within the governmental activities related to capital assets. Of this net amount, a decrease of $8.9 million was attributable to the adjustment of the carrying value of cancelled projects, remediation and donated property costs that were included in construction in progress in prior fiscal years. In addition, an increase of $1.2 million was attributable to costs that should have been included in construction in progress in prior years for a software development project.

G. Pledged Revenue

The State’s debt supported by pledged revenue is as follows (expressed in thousands):

Revenue Bonds-Tobacco Settlement Financing CorporationRevenue:

Tobacco settlement revenue-cash basis $ 47,432Investment income 50Total revenue 47,482

Operating expenses 141Net revenue available for debt service $ 47,341

Required debt service payments $ 38,139

Covered ratio before turbo principal payments (b) 124.13%Annual debt service (principal) turbo redemption (a) 10,005Total annual debt service $ 48,144

Covered ratio after turbo principal payments 98.33%Term of commitment - through June 2052

Revenue Bonds-GARVEE (Federal Highway)Revenue - FHWA participation $ 6,254Less: operating expenses -

Net available revenue $ 6,254

Debt service (d)Principal $ - Interest 6,254

Total debt service $ 6,254

Coverage (b) 100.00%Term of commitment - through June 2021

Revenue Bonds-GARVEE (Gas Tax)Revenue - 2 cents per gallon of the gasoline tax $ 8,981Less: operating expenses - Net available revenue $ 8,981

Debt servicePrincipal $ 4,375Interest 2,839

Total debt service $ 7,214

Coverage (b) 124.49%Term of commitment - through June 2027

Division of Motor Vehicles Capital Lease (c)

149


H. Special Items


RI Division of Higher Education Assistance

Effective July 1, 2015, the R.I. Higher Education Assistance Authority (RIHEAA), previously a discretely presented component unit, was dissolved and its operations were assumed by the newly created Division of Higher Education Assistance (RIDHEA) within the Office of the Commissioner of Post-Secondary Education. The State’s fiscal year 2016 financial statements include the RIDHEA as a discretely presented component unit. Beginning net position was decreased for the net position of the RIHEAA which ceased operations on June 30, 2015.

Pursuant to a law enacted by the General Assembly, the assets, deferred outflows of resources, liabilities, and deferred inflows of resources of the RIHEAA were transferred to the RIDHEA on July 1, 2015. In accordance with generally accepted accounting principles, a special item is reflected within the discretely presented component units to reflect the transfer of operations to RIDHEA.

The following table shows the net position transferred to the RIDHEA (expressed in thousands):

Note 18. Subsequent Events

Primary Government

In September 2016, pursuant to a law enacted by the General Assembly, the State made the initial deposit of $15 million to a trust to fund and pay benefits that were earned under the provisions of the State Police Non-Contributory Retirement Plan discussed in Note 13. These funds were received by the State as a result of an

(a) Debt service principal includes "Turbo Maturity" redemptions, whereby TSFC is required to apply 100% of allcollections that are in excess of current funding requirements to the early redemption of the bonds. Annualrevenues have been sufficient to meet scheduled debt service requirements.

(b) Coverage equals net available revenue divided by debt service.

(c) Paid in full in fiscal year 2016. Accordingly, coverage information not presented.

(d) These bonds were refunded during the year.

Current assets $ 42,552Capital assets, net 1,566Other assets 630

Total assets 44,748

Deferred outf low s of resources 232

Current liabilites 1,828Noncurrent liablities 4,543

Total liabilities 6,371

Deferred inflow s of resources 261

Net investment in capital assets 1,566Restricted net position 36,782

Total net position $ 38,348

150


asset forfeiture that stemmed from a multi-law enforcement agency investigation of Google, Inc. The legislation also calls for the State to make payments into the Trust to amortize the remaining unfunded liability over a period of 18 years.

In October 2016, the Rhode Island Commerce Corporation, on behalf of the RI Department of Transportation, issued $245.925 million of Grant Anticipation Bonds. The bonds mature in 2025 to 2031 and have yields ranging from 1.92% to 2.60%. The bonds were issued to provide funding for reconstruction and/or replacement of certain of the State’s bridges, highways and roads, and will be repaid with federal funds.

In November 2016, the voters of the State approved a referendum to allow the opening of a new casino/hotel in Tiverton near the Massachusetts border. This facility, which will replace the Newport Grand Casino, will be operated by the same company that operates the Twin River Casino in Lincoln. Discretely Presented Component Units

On July 1, 2016, the Rhode Island Airport Corporation issued $36,885,000 2016 Series D General Airport Revenue Bonds and $3,445,000 2016 Series E General Airport Revenue Bonds. The 2016 Series D issue matures annually from 2026 through 2046 with interest coupons of 5%. The 2016 Series E issue matures annually from 2017 through 2021 with interest coupons from 1.95% to 2.75%.

In October 2016, the R.I. Housing & Mortgage Finance Corporation (RIHMFC) issued Homeownership Opportunity Bonds Series 68 in the amount of $193,105,000. On October 1, 2016, $7,715,000 in Home Funding Bonds were redeemed prior to maturity and on October 14, 2016, $157,560,000 in Homeownership Opportunity Bonds were redeemed prior to maturity. In addition, on December 1, 2016, $10,770,000 in Multi-Family Development Bonds, and $4,615,000 in General Housing Bond Program Bonds were redeemed prior to maturity. All redemptions were made under provisions in the bond resolutions that allow mortgage prepayments, excess revenues and refunded amounts to be used for such purposes. Additionally, in October 2016, RIHMFC issued a total of $13,820,000 in Federal Financing Bank debt to refinance multi-family developments.

On October 18, 2016, the University of Rhode Island issued Higher Education Facility Revenue Bonds, Council on Postsecondary Education, University of Rhode Island Education and General Revenue Issue 2016 Series A bonds with a par amount of $35,155,000. On the same day, the University issued Higher Education Facility Revenue Bonds, Council on Postsecondary Education, University of Rhode Island Auxiliary Enterprise Revenue Issue Refunding 2016 Series B bonds with a par amount of $53,355,000.

A portion of the proceeds of the 2016 Series A Bonds will be used to finance and refinance the design, construction, renovation, improvement and equipping of certain utility systems and other infrastructure, including, without limitation, wastewater, electrical, telecommunications, natural gas connections and storm water management systems, as well as roadways, walkways and parking facilities.

In addition, a portion of the proceeds of the 2016 Series A Bonds and the 2016 Series B Refunding Bonds will be applied to redeem the 2005 Series A Bonds, the 2005 Series B Bonds, the 2005 Series C Bonds, the 2005 Series D Bonds, the 2005 Series F Bonds, and the 2005 Series G Bonds. The redemptions occurred within 60 days following the date of issuance of the 2016 Series bonds.

The I-195 Redevelopment District Commission has entered into a Purchase and Sale Agreement with SSL Partner, LLC and CV Properties, LLC dated January 14, 2016, in which the District has agreed to sell in three phases District Parcels 22 and 25. The District received an application for financial assistance from SSL Partner, LLC an affiliate of Wexford Science & Technology, LLC, under the Project Fund Act in relation to an office, research and development project to be located partially on a portion of District Parcel 22 and partially on other land of the applicant, located on Dyer and Dorrance Streets in Providence. On December 12, 2016 the District approved the application and committed to provide disbursements from the Project Fund to develop the Project in an aggregate amount not to exceed $18,500,000. The District is authorized to advance up to $1,000,000 from the Project Fund for the purpose of equipping space in the building located at One Ship Street and adjacent to District Parcel 22, owned by the applicant or its affiliate, for the purpose of preparing and equipping space in that building for one or more tenants.

151


Note 19. Restatement of Components of Net Position Aggregate Discretely Presented Component Units Management of the Rhode Island Turnpike and Bridge Authority, a discretely presented component unit, has determined that the components of the Authority’s net position at June 30, 2016 were incorrectly reported. The originally reported amount of net position, net investment in capital assets, was not reduced by the amount of outstanding bond obligations, net of unused debt proceeds and reserves funded by debt proceeds, and certain other amounts. Also, the originally reported amount of restricted net position included reserves funded by debt proceeds which should have been considered in the determination of the amount of net position, net investment in capital assets. The correction of this error had no effect on the Authority’s total net position at June 30, 2016 or the change in net position for the year ended June 30, 2016 as originally reported. At June 30, 2016, the components of the Authority’s net position are as follows:

Components of Net Position –

Rhode Island Turnpike and Bridge Authority

As Originally

Reported (in thousands)

As Restated

(in thousands)

Net investment in capital assets $ 195,424 $ 68,667 Restricted 41,944 35,353 Unrestricted (deficit) (120,611) 12,737 Total net position $ 116,757 $ 116,757

Amounts included for the aggregate discretely presented component units of the State of Rhode Island have been similarly restated to reflect the corrected net position components at June 30, 2016. The correction of this error had no effect on the State’s aggregate discretely presented component units’ total net position at June 30, 2016 or the change in net position for the year ended June 30, 2016 as originally reported. At June 30, 2016, the components of net position of the aggregate discretely presented component units of the State of Rhode Island are as follows:

Components of Net Position –

Aggregate Discretely Presented Component Units

As Originally

Reported (in thousands)

As Restated

(in thousands)

Net investment in capital assets $ 1,439,854 $ 1,313,097 Restricted for:

Debt 252,100 245,509 Other 737,779 737,779 Nonexpendable 127,710 127,710

Unrestricted (deficit) (104,115) 29,233 Total net position $ 2,453,328 $ 2,453,328

152

Required

Supplementary Information


June 30, 2016

Revenues:General Revenues:

Personal Income Tax $ 1,215,737 $ 1,224,900 $ 1,217,430 $ (7,470)General Business Taxes: Business Corporations 136,380 153,500 134,909 (18,591) Public Utilities Gross Earnings 104,700 99,500 103,062 3,562 Financial Institutions 16,500 20,400 21,096 696 Insurance Companies 125,228 121,400 130,344 8,944 Bank Deposits 2,000 2,400 2,556 156 Health Care Provider Assessment 44,937 44,000 43,236 (764)Sales and Use Taxes: Sales and Use 969,532 981,000 971,873 (9,127) Motor Vehicle 36,538 39,200 39,692 492 Motor Fuel 500 (208) (208) Cigarettes 140,780 143,000 142,783 (217) Alcohol 18,840 19,300 19,630 330Other Taxes: Inheritance and Gift 20,400 25,100 70,029 44,929 Racing and Athletics 1,100 1,100 1,059 (41) Realty Transfer Tax 10,211 10,400 10,432 32Total Taxes (1) 2,843,383 2,885,200 2,907,923 22,723Departmental Revenue 357,236 363,800 367,641 3,841Total Taxes and Departmental Revenue 3,200,619 3,249,000 3,275,564 26,564Other Sources: Lottery 331,740 370,100 369,761 (339) Unclaimed Property 10,000 12,100 14,167 2,067 Other Miscellaneous 1,397 3,829 4,102 273Total Other Sources 343,137 386,029 388,030 2,001Total General Revenues 3,543,756 3,635,029 3,663,594 28,565

Federal Revenues 2,672,784 2,799,789 2,610,735 (189,054)Restricted Revenues 243,843 308,238 241,872 (66,366)Other Revenues 78,568 79,370 84,348 4,978Non-budgeted Capital Lease Proceeds 5,021 5,021

Total Revenues (2) 6,538,951 6,822,426 6,605,571 (216,856)Expenditures (4):

General government 712,217 797,329 724,862 72,467 General government - non-budgeted capital lease expenditures 5,021 (5,021) Total general government 712,217 797,329 729,883 67,446Human services 3,712,320 3,816,384 3,694,123 122,261Education 1,515,660 1,507,643 1,482,774 24,869Public safety 513,958 540,374 504,217 36,157Natural resources 93,030 98,249 78,270 19,979Total Expenditures (2) 6,547,185 6,759,979 6,489,267 $ 270,712

Transfer of Excess Budget Reserve to RI Capital Fund 108,813Total Expenditures and Transfers $ 6,547,185 $ 6,759,979 6,598,080

Change in Fund Balance 7,491Fund balance - beginning 501,887Fund balance - ending $ 509,378

(continued)

Budget Budget Actual Budget

Variance

State of Rhode Island and Providence PlantationsSchedule of Revenues, Expenditures and Changes in Fund Balance

For the Fiscal Year Ended June 30, 2016

Budget and ActualGeneral Fund

with Final


Original Final

153

Budget Budget Actual Budget

Variance




with Final


Original Final

Expenditures by Source:General Revenues $ 3,551,989 $ 3,572,582 $ 3,547,905 $ 24,677Federal Funds 2,672,784 2,799,789 2,612,621 187,168Restricted Receipts 243,844 308,238 242,189 66,049Other Funds 78,568 79,370 81,531 (2,161)Non-budgeted Capital Lease Expenditures 5,021 (5,021)

$ 6,547,185 $ 6,759,979 $ 6,489,267 $ 270,712

General Fund - Reconciliation of Budget Results to Changes in Fund Balance:

Budgeted Surplus:

Total Revenue - Final Budget $ 6,822,426Total Expenditures - Final Budget 6,759,979

Final Budget - Projected Surplus (3) $ 62,447

Final Budget and Actual - Results

Total Revenues - Variance (Actual Revenue less than Budget) $ (216,856)Total Expenditures - Variance (Actual Expenditures less than Budget) 270,712

Surplus resulting from operations compared to final budget $ 53,856

Total General Fund Surplus - Fiscal Year Ended June 30, 2016 $ 116,303

Transfer of Excess Budget Reserve to RICAP Fund (108,813)

Net Change in General Fund - Fund Balance $ 7,491

Fund Balance, Beginning 501,887

Fund Balance, Ending $ 509,378

Notes:Due to rounding, numbers presented may not add up precisely to the totals provided.

(4) Debt service expenditures are included in the above respective categories:

General government $ 118,872Education 15,538

$ 134,410

(continued)

(2) Certain revenue and expenditure amounts classified as "Other Financing Sources (Uses)" have been reclassified within the budgetary comparison schedule to align with the State's legally adopted budgetary format.

(3) RI General Law section 35-3-20.1, titled "Limitation on state spending", mandates that expenditure appropriations shall not be greater than 97.0% of estimated general revenue for the fiscal year ending June 30, 2016.

(1) Transfers from the Historic Tax Credit Special Revenue Fund reported as "Other Financing Sources" on the General Fund have been allocated to General Revenue Tax Categories on this schedule to align with the State's legally adopted budget format.

154

Restricted $ 133,193 $ 133,193 $Committed 3,975 3,975 Assigned 137,114 12,811 (a) 124,303 (b)Unassigned 235,096 191,581 (c) 43,515 (d)

Total Fund Balance $ 509,378 $ 341,560 $ 167,818

(d) Remaining fund balance available for appropriation.

See Notes to Required Supplementary Information.

(concluded)

Fund BalanceAvailable for

Appropriation inFiscal 2017

(a) Assigned fund balance not available for appropriation in fiscal 2017 includes (1) centralized cost allocation surplus that requires offset through fiscal 2017centralized charges and (2) general revenue appropriations carried forward by the Governor, Judiciary, and Legislature.

(b) Assigned fund balance available for appropriation in fiscal 2017 includes fiscal 2016 ending surplus amounts of $123.3 million appropriated as resources in the 2017 enacted budget, and fund balance amounts encumbered at June 30, 2016.

(c) Budget Reserve and Cash Stabilization Account - for financial statement purposes, this account is classified as unassigned, yet, it is not considered available for recurring operational appropriations.

Fund Balance NotAvailable for

Statements

Fund BalanceReported in the



Fiscal 2017

For the Fiscal Year Ended June 30, 2016(Expressed in Thousands)

Reconciliation of Fund Balance - Financial Reporting Perspective to Budgetary Perspective

Budgetary Perspective

Appropriation inFinancial

155

Revenues:Taxes $ 141,711 $ 141,711 $ 184,793 $ 43,082Licenses, fines, sales, and services 59,067 22,444 (36,623)Departmental restricted revenue 1,000 160 2,882 2,722Federal grants 263,615 274,256 254,271 (19,985)Other revenues 10,910 2,610 2,798 188

Total revenues 417,236 477,804 467,188 (10,616)Revenues and other Financing Sources (unbudgeted):

Miscellaneous revenue (612)Total revenues 466,576

Other Financing Sources:Transfers from RI Capital Plan and Bond

Capital Funds (State FHWA Match) 15,400Proceeds from refunding 230,280Other 38,619

Total Other Financing Sources 284,299Total Revenues and Other Financing Sources 750,875

Expenditures (budgeted):Central Management

Federal Funds 8,853 5,966 2,887Gasoline Tax 8,540 3,783 2,179 1,604

Total - Central Management 8,540 12,636 8,145 4,491Management and Budget

Gasoline Tax 3,695 1,354 2,341Total - Management and Budget 3,695 1,354 2,341

Infrastructure-Engineering-GARVEE/Motor Fuel Tax Bonds

Federal Funds 248,361 237,137 11,224Federal Funds-Stimulus 240,533 17,042 11,256 5,786Restricted Receipts 14,542 160 2,600 (2,440)Gasoline Tax 1,000 72,513 72,319 194Motor Fuel Tax Residuals 73,801 2,500 310 2,190Total - Infrastructure - Engineering 329,876 340,576 323,622 16,954

Infrastructure - MaintenanceGasoline Tax 14,128 19,787 19,509 278Non-Land Surplus Property 10 10 10Outdoor Advertising 100 100 100Rhode Island Highway Maintenance Account 54,349 59,067 30,446 28,621

Total - Infrastructure - Maintenance 68,587 78,964 49,955 29,009Total Expenditures (budgeted) $ 407,003 $ 435,871 $ 383,076 $ 52,795

Expenditures and Financing Uses (unbudgeted):Infrastructure Expenditures - State Match funded

by RI Capital Plan and Bond Capital Funds 19,972Infrastructure Expenditures - GARVEE 1,738Payments to escrow agent 267,328I-195 Redevelopment District Project 2,012Mission 360 Loan Program (50)Transfers to General Fund - Gas Tax 53,136Total Expenditures and Financing Uses (unbudgeted) 344,136

Total Expenditures and Other Financing Uses 727,212

Net change in fund balance 23,663

Fund balance, beginning 112,476

Fund balance, ending $ 136,139See Notes to Required Supplementary Information.

Budget Amounts BudgetBudgetActual

State of Rhode Island and Providence PlantationsSchedule of Revenues, Expenditures, and Changes in Fund Balance

Budget and ActualIntermodal Surface Transportation Fund

Variance


with FinalFinalOriginal


156

State of Rhode Island and Providence Plantations Notes to Required Supplementary Information Fiscal Year Ended June 30, 2016

Budget and Actual An annual budget is adopted on a basis consistent with generally accepted accounting principles for the General Fund and certain special revenue funds. The annual budget is prepared on a comprehensive basis and includes activity that, for financial reporting purposes, is recorded in multiple funds. Consequently, the budgetary comparison schedules for an individual fund include amounts in the "actual" column that have no corresponding original or final budget amount. These amounts are principally interfund transfers which are not included in the comprehensive budget to avoid duplication but are appropriately reflected in the individual fund financial statements. The budget to actual comparison for the General Fund on the preceding pages is summarized and does not present budget and actual amounts detailed at the legal level of budgetary control. The legal level of budgetary control, i.e., the lowest level at which management (executive branch) may not reassign resources without special approval (legislative branch) is the line item within the appropriation act. Examples of line items under “Administration” are “Central Management” and “Auditing”. Management cannot reallocate any appropriations without special approval from the legislative branch. A separate schedule presenting such amounts at the detailed legal level of budgetary control is labeled “Annual Budgetary Comparison Schedules” and is available on the State Controller’s website, http://controller.admin.ri.gov/index.php. The comprehensive annual budget includes transportation function expenditures, the majority of which are reflected in the IST Fund for financial reporting purposes. The IST Fund major fund financial statements include transportation related activity of the various transportation funding sources including gas tax revenues, federal funds, GARVEE and Motor Fuel Bonds, and the proceeds of bonds issued by the I-195 Redevelopment District which were transferred to the IST fund to be utilized for infrastructure projects. The budget to actual comparison schedule for the IST fund on the preceding page is presented at the legal level of budgetary control consistent with the legally adopted budget. Not all the activity reported within the IST fund financial statements is budgeted. Unbudgeted activity has been separately identified in the budget to actual comparison schedule to facilitate reconciliation to the IST fund financial statements. The original budget includes the amounts in the applicable appropriation act, general revenue appropriations carried forward by the Governor, and any unexpended balances designated by the General Assembly.

157

http://controller.admin.ri.gov/index.php

State of Rhode Island and Providence Plantations Required Supplementary Information Fiscal Year Ended June 30, 2016

State of Rhode Island and Providence Plantations Pension Information

Defined Benefit Multiple Employer Cost-Sharing Plan

The Employees’ Retirement System (ERS) Plan is a multiple-employer cost-sharing defined benefit plan covering state employees and local teachers. Separate actuarial valuations are performed for state employees and teachers but not for individual employers within those groups. The net pension liability and other pension related amounts are apportioned based on proportionate employer contributions to the plan. By statute, the State funds 40% of the actuarially determined employer contribution for teachers. This constitutes a special funding situation as described in GASB Statement No. 68. Consequently, the State has recognized its proportionate share of the net pension liability and other related pension amounts for this special funding situation in its financial statements. The amounts included in these schedules for fiscal 2016 reflect a June 30, 2015 measurement date. Additional information for the ERS plan is available in the separately issued audited financial statements of the Employees’ Retirement System of Rhode Island and an additional report prepared to provide the GASB 68 related information for participating employers. The following schedules are presented for the ERS cost-sharing plan with a special funding situation:

ERS – Schedule of State’s Proportionate Share of the Net Pension Liability – State Employees

ERS – Schedule of State Contributions

ERS – Schedule of State’s Proportionate Share of the Net Pension Liability – Teachers

ERS – Schedule of State Contributions – Teachers

These schedules are intended to show information for 10 years – additional years will be displayed as information becomes available. Note 13 to the financial statements contains detailed information concerning pension plans. See Notes to Required Supplementary Information.

158

2016 2015State's proportion of the net pension liability 89.0% 89.0%

State's proportionate share of the net pensionliability $ 1,767,095 $ 1,585,647

State's covered employee payroll $ 595,832 $ 581,589

State's proportionate share of the net pension liabilityas a percentage of its covered employee payroll 296.6% 272.6%

Plan fiduciary net position as a percentage of thetotal pension liability 55.0% 58.6%


Employees' Retirement System-State Employees-Governmental Activities

Required Supplementary InformationState of Rhode Island and Providence Plantations

Schedule of State's Proportionate Shareof the Net Pension Liability

Last Two Fiscal Years(Expressed in Thousands)

159

Employees' Retirement System-State Employees-Governmental Activities

2016 2015Actuarially determined contribution $ 144,696 $ 138,689

Contributions in relation to the actuariallydetermined contribution $ 144,696 $ 138,689

Contribution deficiency (excess) $ - $ -

Covered-employee payroll $ 612,081 $ 594,466

Contributions as a percentage of covered-employee payroll 23.64% 23.33%


State of Rhode Island and Providence PlantationsRequired Supplementary Information

Schedule of State ContributionsLast Two Fiscal Years


160

2016 2015State's proportion of the net pension liability 40.59% 40.68%

State's proportionate share of the net pensionliability $ 1,117,395 $ 990,129

Plan fiduciary net position as a percentage of thetotal pension liability 57.60% 61.40%



Schedule of the State's Proportionate Shareof the Net Pension Liability


Employees' Retirement System-State Share-Teachers (Special Funding Situation)

161

2016 2015Statutorily required contribution $ 87,998 $ 84,944

Contributions in relation to the statutorilyrequired contribution 87,998 84,944

Annual contribution deficiency (excess) $ - $ -


Employees' Retirement System-State Share-Teachers (Special Funding Situation)




162



Single Employer Defined Benefit Plans

Certain state employees are covered by the following single-employer plans, separate from the ERS plan, which covers most state employees.

State Police Retirement Benefits Trust (SPRBT) Judicial Retirement Benefits Trust (JRBT) Rhode Island Judicial Retirement Fund Trust (RIJRFT)

These plans are administered within the Employees’ Retirement System of Rhode Island. Separate actuarial valuations are performed of each plan. Additional information for the plans is available in the separately issued audited financial statements of the Employees’ Retirement System of Rhode Island. The amounts included in these schedules for fiscal 2016 reflect a June 30, 2015 measurement date. The following schedules are presented for each single-employer plan:

Schedule of Changes in the Net Pension Liability and Related Ratios

o SPRBT

o JRBT

o RIJRFT

Schedule of State Contributions

o SPRBT

o JRBT

o RIJRFT

These schedules are intended to show information for 10 years – additional years will be displayed as information becomes available. Note 13 to the financial statements contains detailed information concerning pension plans. See Notes to Required Supplementary Information.

163

2016 2015Total Pension LiabilityService cost $ 4,198 $ 5,122 Interest 8,540 7,768 Benefit Changes 1,170 - Differences between expected and actual experience (3,522) - Changes of assumptions - (364) Benefit payments (2,497) (1,767) Net Change in Total Pension Liability 7,889 10,759 Total Pension Liability-Beginning 113,018 102,259 Total Pension Liability-Ending $ 120,907 $ 113,018

Plan Fiduciary Net PositionEmployer contributions $ 3,432 $ 3,331 Employee contributions 1,732 2,034 Net investment income 2,656 14,124 Benefit payments (2,497) (1,767) Transfers of member contributions - - Administrative expenses (100) (83) Other 4 5 Net Change in Plan Fiduciary Net Position $ 5,227 $ 17,644

Plan Fiduciary Net Position-Beginning 109,679 92,035 Plan Fiduciary Net Position-Ending $ 114,906 $ 109,679

Net Pension Liability $ 6,001 $ 3,339

Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 95.0% 97.0%Covered Employee Payroll $ 19,701 $ 23,051 Net Pension Liability as a Percentage of Covered Employee Payroll 30.5% 14.5%


State Police Retirement Benefits Trust


Schedule of Changes in Net Pension Liabilityand Related Ratios


164

2016 2015Total Pension LiabilityService cost $ 3,024 $ 3,002 Interest 4,540 4,134 Benefit Changes 253 - Differences between expected and actual experience (2,857) - Changes of assumptions - (672) Benefit payments (1,809) (1,631) Net Change in Total Pension Liability 3,151 4,833 Total Pension Liability-Beginning 59,934 55,101 Total Pension Liability-Ending $ 63,085 $ 59,934

Plan Fiduciary Net PositionEmployer contributions $ 2,709 $ 2,543 Employee contributions 1,121 1,093 Net investment income 1,368 7,221 Benefit payments (1,809) (1,631) Transfers of member contributions - - Administrative expenses (51) (43) Other - - Net Change in Plan Fiduciary Net Position $ 3,338 $ 9,183

Plan Fiduciary Net Position-Beginning 56,172 46,989 Plan Fiduciary Net Position-Ending $ 59,510 $ 56,172




Judicial Retirement Benefits Trust




165

2016 2015Total Pension LiabilityService cost $ 416 $ 498 Interest 673 710 Benefit Changes - - Differences between expected and actual experience (642) 1,617 Changes of assumptions 859 (1,160) Benefit payments - - Net Change in Total Pension Liability 1,306 1,665 Total Pension Liability-Beginning 17,506 15,841 Total Pension Liability-Ending $ 18,812 $ 17,506

Plan Fiduciary Net PositionEmployer contributions $ - $ - Employee contributions 159 153 Net investment income 9 12 Benefit payments - - Transfers of member contributions - - Administrative expenses - - Other - - Net Change in Plan Fiduciary Net Position $ 168 $ 165

Plan Fiduciary Net Position-Beginning 318 153 Plan Fiduciary Net Position-Ending $ 486 $ 318




Rhode Island Judicial Retirement Fund Trust




166

State Police Retirement Benefits Trust2016 2015

Actuarially determined contribution $ 4,005 $ 3,432

Contributions in relation to the actuariallydetermined contribution 4,005 3,432







Schedule of State Contributions

167

Judicial Retirement Benefits Trust2016 2015


Contributions in relation to the actuariallydetermined contribution 2,410 2,709








168

Rhode Island Judicial Retirement Fund Trust2016 2015


Contributions in relation to the actuariallydetermined contribution 140 -

Contribution deficiency (excess) $ 1,372 $ 1,623


Contributions as a percentage of covered-employee payroll 11.9% N/A





169



Non-Contributory (pay-as-you-go) Defined Benefit Single Employer Plans

Certain retired state employees are covered by the following single-employer plans, which are separate from the plans previously described, and are not part of the Employees’ Retirement System of Rhode Island.

State Police Non-Contributory Retirement Plan Judicial Non-Contributory Retirement Plan

The State funds these plans on a pay-as-you-go basis and no actuarially determined advance employer contribution is made nor are assets accumulated in a trust to pay future benefits. Separate actuarial valuations are performed to provide the accounting measures of the total pension liability for each of the plans. The amounts included in these schedules for fiscal 2016 reflect a June 30, 2015 measurement date. The following schedules are presented for each plan:

Schedule of Changes in the Total Pension Liability

o State Police Non-Contributory Retirement Plan o Judicial Non-Contributory Retirement Plan

The Schedule of State Contributions is not presented as the plans operate on a pay-as-you-go basis and there is no covered payroll because there are no active members of the plans. These schedules are intended to show information for 10 years – additional years will be displayed as information becomes available. Note 13 to the financial statements contains detailed information concerning pension plans. See Notes to Required Supplementary Information.

170

Total Pension Liability 2016 2015Service cost $ - $ - Interest 10,503 10,795 Benefit changes - - Differences between expected and actual experience 3,565 - Changes of assumptions 15,955 - Benefit payments (17,512) (17,700) Net Change in Total Pension Liability 12,511 (6,905) Total Pension Liability-Beginning 253,580 260,485 Total Pension Liability-Ending $ 266,091 $ 253,580


State Police Non-Contributory Retirement Plan


Schedule of Changes in Total Pension LiabilityLast Two Fiscal Years


171

Total Pension Liability 2016 2015Service cost $ - $ - Interest 2,172 2,334 Benefit changes - - Differences between expected and actual experience 328 - Changes of assumptions 1,885 - Benefit payments (6,020) (6,173) Net Change in Total Pension Liability (1,635) (3,839) Total Pension Liability-Beginning 53,653 57,492 Total Pension Liability-Ending $ 52,018 $ 53,653


Judicial Non-Contributory Retirement Plan


Schedule of Changes in Total Pension LiabilityLast Two Fiscal Years


172

State of Rhode Island and Providence Plantations Notes to Required Supplementary Information Fiscal Year ended June 30, 2016

Required Supplementary Information – Pensions

Significant Methods and Assumptions used in calculating the actuarially determined contributions

Actuarially determined contributions are calculated as of June 30, three years prior to the fiscal year in which the contribution rates are applicable. The actuarially determined contribution rates for fiscal 2016 were determined based on valuations performed as of June 30, 2013. Significant methods and assumptions are summarized for each plan in the table below:

ERS SPRBT JRBT RIJRFT State Employees Teachers


Entry Age Normal - the Individual Entry Age Actuarial Cost methodology is used.

Amortization Method Level Percent of Payroll – Closed Level Dollar

Equivalent single remaining amortization period 22 years remaining at June 30, 2013

Asset valuation method 5 year smoothed market

Amortization period for gains and losses 20 years

Actuarial Assumptions Investment Rate of Return 7.50% 4.00%


3.50% to 6.50% 3.50% to 13.5% 3.75% to 11.75% 3.50% 3.50%

Mortality • Male Employees, MERS General and MERS P&F: 115% of RP-2000 Combined Heal thy for Males with White Collar adjustments, projected with Scale AA from 2000.

• Female Employees, MERS General and MERS P&F: 95% of RP-2000 Combined

Healthy for Females with White Collar adjustments, projected with Scale AA from 2000.

Male and female t e a c h e r s : 97% and 92%, respectively of rates in a GRS table based on male and female t e a c h e r experience, projected with Scale AA from 2000.

Inflation 2.75% Cost of Living Adjustments: COLA is equal to the average five-year fund asset performance (percent) greater than 5.5% up to a maximum of 4% - the COLA is to be applied to the first $25,000 of benefits, indexed over time. COLA is delayed until the latter of Social Security eligibility age or 3 years after retirement except for State Police for which the COLA is delayed until the later of age 55 or 3 years after retirement.

Factors affecting trends for amounts related to the net pension liability

There were no changes in actuarial methods or assumptions reflected in the calculation of the net pension liability as of the June 30, 2015 measurement date compared to the June 30, 2014 measurement

173

State of Rhode Island and Providence Plantations Notes to Required Supplementary Information Fiscal Year ended June 30, 2016

date except for the changes in assumption for the RIJRFT plan due to use of the municipal bond index rate of 3.8% compared to 4.29% used in the June 30, 2014 valuation. Benefit changes, which resulted from the settlement of the pension litigation and the subsequent enactment of those settlement provisions by the General Assembly, are reflected in the calculation of the net pension liability at the June 30, 2015 measurement date. Significant benefit changes are summarized below:

• Employees with more than 20 years of service at July 1, 2012 will increase their employee contribution rates to 11% for state employees and participate solely in the defined benefit plan effective July 1, 2015 – service credit accruals will increase from 1% to 2% per year.

• Members are eligible to retire upon the attainment of: age 65 with 30 years of service, 64 with 31

years of service, or 62 with 33 years of service. Members may retire earlier if their RI Retirement Security Act date is earlier or are eligible under a transition rule.

• The COLA formula was adjusted to 50% of the COLA is calculated by taking the previous 5-year

average investment return, less the discount rate (5 year return – 7.5%, with a max of 4%) and 50% calculated using the previous year’s CPI-U (max of 3%) for a total max COLA of 3.5%. The COLA is calculated on the first $25,855, effective, 01/01/2016, and indexed as of that date as well.

• Other changes included providing interim cost of living increases at four rather than five year

intervals, providing a one-time cost of living adjustment of 2% (applied to first $25,000), two $500 stipends, and minor adjustments

174

UAAL as aActuarial Funded Percentage ofValuation Ratio Covered Payroll

Date ( a / b ) (( b - a ) / c)

06/30/2015 $ 92,125 $ 622,826 $ 530,701 14.8% $ 682,965 77.7%06/30/2013 39,527 637,059 597,532 6.2% 671,762 88.9%06/30/2011 * 11,545 728,207 716,662 1.6% 600,273 119.4%


Date ( a / b ) (( b - a ) / c)

06/30/2015 $ 6,648 $ 13,050 $ 6,402 50.9% NA NA06/30/2013 3,230 12,569 9,339 25.7% NA NA06/30/2011 2,040 11,512 9,472 17.7% NA NA

(Overfunded)/UAAL as a

Actuarial Funded Percentage ofValuation Ratio Covered Payroll

Date ( a / b ) (( b - a ) / c)

06/30/2015 $ 2,826 $ 756 $ (2,070) 373.8% $ 10,281 -20.1%06/30/2013 2,151 1,054 (1,097) 204.1% 13,447 -8.2%06/30/2011 841 2,610 1,769 32.2% 10,813 16.4%


Date ( a / b ) (( b - a ) / c)

06/30/2015 $ 22,920 $ 78,857 $ 55,937 29.1% $ 18,119 308.7%06/30/2013 9,587 70,385 60,798 13.6% 17,748 342.6%06/30/2011 1,488 81,759 80,271 1.8% 17,384 461.8%

(Overfunded)/UAAL as a

Actuarial Funded Percentage ofValuation Ratio Covered Payroll

Date ( a / b ) (( b - a ) / c)

06/30/2015 $ 2,469 $ 1,317 $ (1,152) 187.5% $ 1,742 -66.1%06/30/2013 2,202 1,549 (653) 142.2% 1,695 -38.5%06/30/2011 1,442 1,443 1 99.9% 1,615 0.1%


Date ( a / b ) (( b - a ) / c)

06/30/2015 $ 14,608 $ 69,106 $ 54,498 21.1% $ 113,947 47.8%06/30/2013 7,486 55,706 48,220 13.4% 113,375 42.5%06/30/2011 3,189 53,751 50,562 5.9% 125,340 40.3%



Schedules of Funding ProgressOther Postemployment Benefits

June 30, 2016

Assets (UAAL) Payroll( a ) ( b ) ( b - a ) ( c )


State Employees Plan

Actuarial Actuarial Accrued UnfundedValue of Liability (AAL) AAL Covered


Teachers Plan



Judicial Plan



State Police Plan



Legislators Plan



Board of Education Health Care Insurance Retirement Plan


175


Schedules of Funding Progress - Other Postemployment Benefits 1. Actuarial Assumptions and Methods

The information presented in the required supplementary information schedules was determined as part of the actuarial valuations at the dates indicated. Additional information as of the latest actuarial valuation, June 30, 2015, is included in Note 14.

2. Schedules of Funding Progress Changes affecting the June 30, 2015 Actuarial Valuation: There have been some changes in actuarial assumptions since the June 30, 2013 valuation. Certain actuarial assumption for State Employees, Legislators and Board of Education were updated to match the assumptions used for State Employees in the most recent pension valuation for the Employees’ Retirement System of Rhode Island (ERSRI). Changes were made to the following assumptions; merit and longevity portion of the salary increase assumption, rates of separation from active membership, rates of retirement and rates of disability. In addition, the wage inflation for the State Police was changed to 3.75% in order to match the most recent actuarial valuation of the State Police Retirement Benefits Trust. Also, the health care trend assumption has been reset to 9.0% the first year trending down to 3.5% over 10 years. The excise tax load was increased from 11% to 13.8%. The excise tax has been delayed by one year; however, the rate increase in pre-65 pre-capita costs has out-paced increases in price inflation which has a lowering effect on the excise tax. Changes affecting the June 30, 2013 Actuarial Valuation: Several changes were made in OPEB specific actuarial assumptions and methods between the June 30, 2011 and June 30, 2013 valuations. Changes to the OPEB specific assumptions include a decrease in the wage inflation and long term health care assumptions from 4% to 3.5%. In addition, the excise tax load expected to be imposed under the Patient Protection and Affordable Care Act on pre-65 liabilities was changed from 7.4% to 11%. Also, there was a change in actuarial method. The premium development methodology was changed to create a single premium for all groups. Changes affecting the June 30, 2011 Actuarial Valuation: A number of changes in actuarial assumptions were made between the June 30, 2009 and June 30, 2011 valuations. These changes include reflecting new assumptions adopted by the Employees Retirement System of Rhode Island (ERSRI) and the State Police Retirement Benefits Trust of Rhode Island (SPRBT), changes to the OPEB specific assumptions as well as the provisions of the Retirement Security Act, which was enacted on November 18, 2011 and included comprehensive pension reform measures. The June 30, 2011 valuation also reflects the potential excise tax under the Patient Protection and Affordable Care Act. Changes from the ERSRI and SPRBT experience studies include changes to the retirement and disability rates and salary expectations. In addition, new mortality assumptions were adopted for all plans which provide for future mortality improvement by using generational mortality. The significant decrease in the unfunded actuarial accrued liability for the Judicial and Legislator plans is primarily due to retirement eligibility changes resulting from enactment of the Retirement Security Act and an increase in the Medicare election rate. Changes to the OPEB specific assumptions include a change in the medical trend assumption from 9% decreasing to 4.5% in 8 years to 9% decreasing to 4.0% in 10 years, a change in the Medicare election rate for Legislators from 75% electing Medicare to 100% electing Medicare and the addition of the assumption that current retired Teachers over age 65 in the Early Retiree Plan are assumed to not be eligible for Medicare.

176


The June 30, 2011 actuarial valuation employs a four-year smoothed market methodology for the determination of the actuarial value of assets. In addition, the Judicial and Legislator plans changed from a level percent of payroll amortization method to the level dollar method. The Patient Protection and Affordable Care Act includes an excise tax on high cost health plans beginning in 2018. The excise tax is 40% of costs above a threshold. The actuarial assumptions used in the most recent valuation assume that the plans will be subject to the excise tax as early as 2018. The General Laws were amended in the 2013 session of the General Assembly to modify the manner in which health insurance is provided to Medicare eligible retirees covered under the System’s plan covering state employees. The System’s actuary has updated the June 30, 2011 actuarial valuation to reflect the effect on the Actuarial Accrued Liability resulting from this change.

177

Combining Financial

Statements


June 30, 2016

State of Rhode Island and Providence Plantations Comprehensive Annual Financial Report

Nonmajor Funds

Special Revenue Funds - account for the proceeds of specific revenue sources that are legally restricted to expenditure for specified purposes and where a separate fund is mandated.

Coastal Resources Management Council Dredge Fund – accounts for fees in excess of the base rate per cubic yard for the disposal of dredge materials. These funds must be used to create additional dredging and disposal options. R.I. Temporary Disability Insurance Fund – accounts for the employee tax on wages that are levied to pay benefits to covered employees who are out of work for an extended period of time due to a non-job-related illness. Historic Tax Credit Financing Fund – accounts for application fees relating to historic tax credit eligible projects, proceeds from the issuance of Revenue Bonds under the Historic Structures Tax Credit Financing Program as well as related expenditures and transfers. R.I. Public Rail Corporation – accounts for activity of this entity which includes state appropriations, insurance and other administrative expenses and property rental related activities.

Capital Project Funds – account for resources obtained and used for the acquisition, construction or improvement of capital facilities not reported in other governmental or proprietary funds.

Bond Capital – accounts for the proceeds of the bonds issued and the related capital expenditures not required to be accounted for in another capital projects fund. R.I. Capital Plan – accounts for the portion of the payment into the budget reserve account that causes the balance in the budget reserve account to be in excess of the legal requirement and proceeds as designated by statute. The fund is to be used solely for funding capital projects. R.I. Clean Water Act Environmental Trust – accounts for the proceeds of certain bonds issued of which the proceeds are restricted to providing grants and loans to local governmental entities and the required State share or related expenses for the Narragansett Bay study. Certificates of Participation – accounts for the proceeds of the sale of certificates of participation which provide funding for the acquisition, construction or improvement of public facilities and equipment.

Debt Service Funds – are used to account for and report financial resources that are restricted, committed, or assigned to expenditure for principal and interest. Debt service funds are used to report resources if legally mandated or when financial resources are being accumulated for principal and interest maturing in future years.

Tobacco Settlement Financing Corporation (TSFC) – created to securitize the tobacco settlement revenues from the State.

Permanent Funds – are used to report resources that are legally restricted to the extent that only earnings, and not principal, may be used for the purposes that support the State’s programs.

Permanent School – accounts for certain appropriations of the General Assembly and the earnings thereon, which are to be used for the promotion and support of public education.

178

State of Rhode Island and Providence PlantationsCombining Balance Sheet

Nonmajor Governmental FundsJune 30, 2016


Assets

Cash and cash equivalents $ 664 $ 104,213 $ 6,224 $ 112 $ 111,213 $ 72,264 $ 61,816 $ 5,284 $ $ 139,364 $ 184 $ 2,209 $ 252,970Funds on deposit with fiscal agent 53,429 53,429 23,694 23,694 77,123Restricted cash equivalents 52,241 52,241Receivables (net) 48,312 48,312 23,982 72,294Due from other funds 84 306 390 390Loans to other funds 108,813 108,813 108,813

Total assets $ 664 $ 152,609 $ 59,959 $ 112 $ 213,344 $ 72,264 $ 170,629 $ 5,284 $ 23,694 $ 271,871 $ 76,407 $ 2,209 $ 563,831Liabilities and Fund Balances

LiabilitiesAccounts payable 56 56 9,811 7,996 2,799 20,606 20,662Due to other funds 1,115 1,225 2,340 2,340Due to component units 7,626 8,481 7,801 23,908 23,908Loans from other funds 8 8 8Other liabilities 268 268 67 200 267 535

Total liabilities 324 324 18,619 17,902 10,608 47,129 47,453

Fund balancesNonspendable 174 174Restricted 664 152,285 59,959 212,908 53,645 152,727 5,284 13,086 224,742 76,407 2,035 516,092Unrestricted

Committed 112 112 112Total fund balances 664 152,285 59,959 112 213,020 53,645 152,727 5,284 13,086 224,742 76,407 2,209 516,378

Total liabilities and fund balances $ 664 $ 152,609 $ 59,959 $ 112 $ 213,344 $ 72,264 $ 170,629 $ 5,284 $ 23,694 $ 271,871 $ 76,407 $ 2,209 $ 563,831

Debt Service

TobaccoSettlement

Corporation

ResourcesManagement

Council Dredge PlanFundsCorporationDisability Financing

Certificatesof

Participation

R.I. CapitalProjectFunds

Water ActCapital

TrustRevenue Bond

Capital Funds

TotalR.I. Total TotalNonmajor

GovernmentalRail Financing PermanentSpecial

R.I. Clean

School

Permanent

Temporary

Historic

EnvironmentalTax

CreditPublicR.I.

Capital ProjectSpecial Revenue

Coastal

179

State of Rhode Island and Providence PlantationsCombining Statement of Revenues, Expenditures, and Changes in Fund Balances

Nonmajor Governmental FundsFor the Fiscal Year Ended June 30, 2016


Revenues:Taxes $ $ 186,283 $ $ $ 186,283 $ $ $ $ $ $ $ $ 186,283Licenses, fines, sales, and services 1,927 27 1,954 247 2,201Income from investments 347 17 364 271 225 18 79 593 50 7 1,014Other revenues 16 16 47,456 47,472

Total revenues 186,630 1,944 27 188,601 271 225 18 95 609 47,506 254 236,970Expenditures:

Current:General government 184,026 2,500 186,526 141 186,667Natural resources 37 37 37Transportation 1,538 1,538 1,538

Capital outlays 93,786 76,856 28 14,691 185,361 185,361Debt service:

Principal 3,075 3,075 21,155 24,230Interest and other charges 2 2 1,947 269 2,216 27,199 29,417

Total expenditures 37 184,026 2,502 1,538 188,103 95,733 76,856 28 18,035 190,652 48,495 427,250

Excess (deficiency) of revenuesover (under) expenditures (37) 2,604 (558) (1,511) 498 (95,462) (76,631) (10) (17,940) (190,043) (989) 254 (190,280)

Other financing sources (uses)Issuance of bonds and notes 72,000 72,000 72,000Issuance of refundings 228,955 228,955 228,955Premium 34,897 34,897 34,897Transfers in 1,533 1,533 110,530 1,135 111,665 113,198Payment to refunded

bonds escrow agent (265,453) (265,453) (265,453)Transfers out (1,891) (12,615) (14,506) (5,492) (13,746) (979) (20,217) (34,723)

Total other financing sources (uses) (1,891) (12,615) 1,533 (12,973) 64,907 96,784 156 161,847 148,874

Net change in fund balances (37) 713 (13,173) 22 (12,475) (30,555) 20,153 (10) (17,784) (28,196) (989) 254 (41,406)

Fund balances - beginning 701 151,572 73,132 90 225,495 84,200 132,574 5,294 30,870 252,938 77,396 1,955 557,784

Fund balances - ending $ 664 $ 152,285 $ 59,959 $ 112 $ 213,020 $ 53,645 $ 152,727 $ 5,284 $ 13,086 $ 224,742 $ 76,407 $ 2,209 $ 516,378

TaxCredit

Financing

ResourcesTemporaryDisability FundsParticipation

Permanent

Tobacco

Capital Projects

R.I. Clean

Debt ServiceSpecial Revenue

R.I. TotalCoastal Historic

ProjectEnvironmental of

TotalCapitalCertificatesWater ActSpecial R.I.

CapitalFundsBond

TotalNonmajor

GovernmentalFunds

PermanentSchoolCorporation

SettlementFinancingManagement

Council DredgeCapital

Plan

R.I.Rail

Corporation

Public

TrustRevenue

180

* Revenues:Taxes $ 186,283 $ 186,283 $ 186,283 $Other Revenues 347 347 347

Total Revenues 186,630 186,630 186,630

Expenditures:

Department of Labor and Training 193,989 183,612 185,717 (2,105)

Treasury Department 219 234 200 34

Total Expenditures $ 194,208 $ 183,846 $ 185,917 $ (2,071)

Net change in fund balance 713

* Fund balance - beginning 151,572

Fund balance - ending $ 152,285

*are assumed to equal actual amounts.

VarianceWith FinalFinal

Budget AmountsActual

Revenues are not legislatively adopted, budgeted revenues and opening surplus

State of Rhode Island and Providence PlantationsSchedule of Revenues, Expenditures, and Changes in Fund Balance

Budget and ActualRhode Island Temporary Disability Insurance Fund

Budget


OriginalBudget


181


Internal Service Funds

Internal Service Funds are used to account for the financing and provision of specified goods and services, on a centralized basis, for other departments and agencies.

Assessed Fringe Benefits – accounts for the biweekly assessment of a percentage applied to salaries and wages to pay for certain fringe benefits, including workers’ compensation to State employees injured on the job. Central Utilities – processes all electric bills for the State and charges the expending department/agency. Central Mail – provides for the delivery of mail services for the State. State Telecommunications – provides telecommunication services for the State, processes all of the telephone bills for the State and charges the expending department/agency. Automotive Maintenance – approves work orders, pays the corresponding bills for the State’s motor vehicle fleet and bills the user department/agency. Central Warehouse – provides a low-cost centralized distribution center for food for State institutions and local public school districts. Correctional Industries – provides job training for inmates through prison industries. Surplus Property – accounts for the revenues received and the expenses incurred from the disposition of State surplus property. Records Center – provides a centralized location for the archival of State documents. Health Insurance Active – pays active employee health benefits. State Fleet Replacement Revolving Loan – used to finance the acquisition of new vehicles by various State agencies, and functions as a revolving loan fund. Capitol Police – provides security for certain State buildings.

182


Internal Service FundsJune 30, 2016


Assets:Current assets:

Cash and cash equivalents $ 2,122 $ 1,987 $ $ $ 1,022 $ 2,537 $ 482Receivables (net) 1,983 493 125 985 33 1,309Due from other funds 161 218 24 322 272Inventories 572 187 613 424Other assets 1

Total current assets 4,105 2,148 1,284 125 2,218 3,505 2,487

Noncurrent assets: Capital assets (net) 12 7 27 2,424 198

Total noncurrent assets 12 7 27 2,424 198

Total assets 4,117 2,148 1,291 125 2,245 5,929 2,685

Liabilities:Current liabilities:

Accounts payable 446 139 55 76 1,160 390 1,076Due to other funds 241 149Loans from other funds 650 2,012 983 367 750 800Other liabilities 1,570 8 189 96 58 129 278

Total current liabilities 2,907 2,159 1,227 688 1,968 519 2,154

Net Position (Deficit):Net investment in capital assets 12 7 27 2,424 198Unrestricted 1,198 (11) 57 (563) 250 2,986 333

Total net position (deficit) $ 1,210 $ (11) $ 64 $ (563) $ 277 $ 5,410 $ 531

(Continued)

Assessed StateTelecom- Automotive Central

munications Maintenance WarehouseFringe Central Central

MailBenefits Utilities IndustriesCorrectional

183


Internal Service FundsJune 30, 2016


Assets:Current assets:

Cash and cash equivalentsReceivables (net)Due from other fundsInventoriesOther assets

Total current assets

Noncurrent assets: Capital assets (net)


Total assets

Liabilities:Current liabilities:

Accounts payableDue to other fundsLoans from other fundsOther liabilities

Total current liabilities

Net Position (Deficit):Net investment in capital assetsUnrestricted

Total net position (deficit)

Total

$ 66 $ 166 $ 19,268 $ 5,654 $ $ 33,304118 3,794 4,796 13,636

26 1,0231,796

5,995 5,996

66 284 29,083 10,450 55,755

2,668

2,668

66 284 29,083 10,450 58,423

48 19,042 22,43293 1,457 1,940

300 48 5,91058 609 2,995

499 19,651 1,457 48 33,277

2,66866 (215) 9,432 8,993 (48) 22,478

$ 66 $ (215) $ 9,432 $ 8,993 $ (48) $ 25,146

(Concluded)

Center

Health

PropertyInsurance

ActiveRecordsSurplus Capitol

Police

State FleetReplacement

Revolving Loan

184

State of Rhode Island and Providence PlantationsCombining Statement of Revenues, Expenses, and Changes in Net Position

Internal Service FundsFor the Fiscal Year Ended June 30, 2016


Operating revenues:Charges for services

Total operating revenues

Operating expenses:Personal servicesSupplies, materials, and servicesDepreciation

Total operating expensesOperating income (loss)

Nonoperating revenues (expenses):Interest revenueOther nonoperating revenues

and (expenses)Change in net position

Net position (deficit) - beginningNet position (deficit) - ending

$ 40,017 $ 14,618 $ 6,196 $ 3,145 $ 11,184 $ 5,458 $ 6,05240,017 14,618 6,196 3,145 11,184 5,458 6,052

6,333 888 905 587 923 1,63130,575 14,618 4,669 2,334 11,425 4,523 5,544

5 1 17 99 4736,913 14,618 5,558 3,239 12,029 5,545 7,222

3,104 638 (94) (845) (87) (1,170)

5

19 13,128 638 (94) (845) (86) (1,170)

(1,918) (11) (574) (469) 1,122 5,496 1,701$ 1,210 $ (11) $ 64 $ (563) $ 277 $ 5,410 $ 531

(Continued)

CorrectionalWarehouse

CentralBenefits Utilities

Telecom-Assessed State

MaintenanceFringe Central AutomotiveCentral

Mail munications Industries

185

State of Rhode Island and Providence PlantationsCombining Statement of Revenues, Expenses, and Changes in Net Position



Operating revenues:Charges for services

Total operating revenues

Operating expenses:Personal servicesSupplies, materials, and servicesDepreciation

Total operating expensesOperating income (loss)

Nonoperating revenues (expenses):Interest revenueOther nonoperating revenues

and (expenses)Change in net position

Net position (deficit) - beginningNet position (deficit) - ending

Total

$ $ 812 $ 226,367 $ 43 $ 1,002 $ 314,894812 226,367 43 1,002 314,894

519 629 1,002 13,4172 435 230,129 1,753 306,007

1692 954 230,758 1,753 1,002 319,593

(2) (142) (4,391) (1,710) (4,699)

99 13 117

20(2) (142) (4,292) (1,697) (4,562)68 (73) 13,724 10,690 (48) 29,708

$ 66 $ (215) $ 9,432 $ 8,993 $ (48) $ 25,146

(Concluded)

SurplusActiveProperty

CapitolPolice

RecordsState Fleet

ReplacementInsuranceHealth

Center Revolving Loan

186

State of Rhode Island and Providence PlantationsCombining Statement of Cash Flows



Cash flows from operating activities:Cash received from customers $ 40,397 $ 14,845 $ 5,570 $ 3,738 $ 10,207 $ 5,355 $ 5,578Cash payments to suppliers for goods and services (30,552) (14,709) (4,931) (2,354) (10,552) (4,609) (3,789)Cash payments to employees (6,778) 1 (865) (930) (579) (923) (1,609)Other operating revenue (expense) 19 1

Net cash provided by (used for) operating activities 3,086 137 (226) 454 (924) (176) 180Cash flows from noncapital financing activities:

Loans from other funds 2,000 4,616 982 367 750 800Loans to other fundsRepayment of loans to other fundsRepayment of loans from other funds (4,000) (3,398) (748) (821) (1,050)

Net cash provided by (used for) noncapital financing activities (2,000) 1,218 234 (454) 750 (250)Cash flows from capital and related financing activities:

Acquisition of capital assets (8) (33) (8)Net cash provided by (used for) capital and related financing

activities (8) (33) (8)Cash flows from investing activities:

Interest on investments 5Net cash provided by (used for) investing activities 5

Net increase (decrease) in cash and cash equivalents 1,091 1,355 (174) (209) (78)Cash and cash equivalents - July 1 1,031 632 1,196 2,746 560Cash and cash equivalents - June 30 $ 2,122 $ 1,987 $ $ $ 1,022 $ 2,537 $ 482

(Continued)

municationsUtilities

AssessedFringe

BenefitsCentralTelecom-

State

MaintenanceAutomotiveCentral

Warehouse IndustriesCentral

MailCorrectional

187




municationsUtilities

AssessedFringe

BenefitsCentralTelecom-

State

MaintenanceAutomotiveCentral

Warehouse IndustriesCentral

MailCorrectional

Reconciliation of operating income (loss) to net cashprovided by (used for) operating activities:Operating income (loss) $ 3,104 $ $ 638 $ (94) $ (845) $ (87) $ (1,170)

Adjustments to reconcile operating income (loss)to net cash provided by (used for) operatingactivities:

Depreciation 5 1 17 99 47Other revenue (expense) and transfers in (out) 19 1(Increase) decrease in assets:

Receivables 380 227 (330) 592 (615) (103) (475)Inventory (246) 123 (1) 1,440

Increase (decrease) in liabilities:Accounts payable 23 (91) (311) (19) 388 (85) 316Accrued expenses (445) 1 22 (25) 8 22

Total adjustments (18) 137 (864) 548 (79) (89) 1,350Net cash provided by (used for) operating activities $ 3,086 $ 137 $ (226) $ 454 $ (924) $ (176) $ 180

(Continued)

188




Cash flows from operating activities:Cash received from customersCash payments to suppliers for goods and servicesCash payments to employeesOther operating revenue (expense)

Net cash provided by (used for) operating activitiesCash flows from noncapital financing activities:

Loans from other fundsLoans to other fundsRepayment of loans to other fundsRepayment of loans from other funds

Net cash provided by (used for) noncapital financing activitiesCash flows from capital and related financing activities:

Acquisition of capital assetsNet cash provided by (used for) capital and related financing

activitiesCash flows from investing activities:

Interest on investmentsNet cash provided by (used for) investing activities

Net increase (decrease) in cash and cash equivalentsCash and cash equivalents - July 1Cash and cash equivalents - June 30

$ $ 866 $ 223,148 $ 1,226 $ 1,002 $ 311,932(3) (412) (229,710) (1,753) (303,374)

(510) (629) (1,002) (13,824)20

(3) (56) (7,191) (527) (5,246)

48 9,563(10,837) (10,837)11,310 11,310

(60) (48) (10,125)(60) 473 (89)

(49)

(49)

99 13 11799 13 117

(3) (116) (7,092) (41) (5,267)69 282 26,360 5,695 38,571

$ 66 $ 166 $ 19,268 $ 5,654 $ $ 33,304

(Continued)

Active TotalRevolving LoanRecords Capitol

PoliceSurplusProperty


HealthInsurance

Center

189




Reconciliation of operating income (loss) to net cashprovided by (used for) operating activities:Operating income (loss)

Adjustments to reconcile operating income (loss)to net cash provided by (used for) operatingactivities:

DepreciationOther revenue (expense) and transfers in (out)(Increase) decrease in assets:

ReceivablesInventory

Increase (decrease) in liabilities:Accounts payableAccrued expenses

Total adjustmentsNet cash provided by (used for) operating activities

Active TotalRevolving LoanRecords Capitol

PoliceSurplusProperty


HealthInsurance

Center

$ (2) $ (142) $ (4,391) $ (1,710) $ $ (4,699)

16920

(39) (3,219) (3,582)1,316

(1) 115 419 1,183 1,93710 (407)

(1) 86 (2,800) 1,183 (547)$ (3) $ (56) $ (7,191) $ (527) $ $ (5,246)

(Concluded)

190


Trust Funds

Pension Trust Funds

Pension Trust Funds – used to report resources that are required to be held for the members and beneficiaries of the State sponsored pension plans.

Employees’ Retirement System – a multiple-employer, cost-sharing, public employee retirement plan for State employees, teachers and certain employees of local school districts.

Municipal Employees’ Retirement System – an agent multiple-employer public employee retirement plan for municipal police, firemen and employees of municipalities, housing authorities and water and sewer districts that have elected to participate.

State Police Retirement Benefits Trust – a single-employer public employee retirement plan for State police hired after July 1, 1987.

Judicial Retirement Benefits Trust – a single-employer public employee retirement plan for State judges appointed after December 31, 1989.

Judicial Retirement Fund Trust – a single-employer public employee retirement plan for State judges appointed before January 1, 1990.

Teachers’ Survivors Benefit Plan – a multiple-employer, cost-sharing plan that provides a survivor benefit to certain public school teachers in lieu of Social Security, since not all school districts participate in Social Security.

Defined Contribution Plan – a money purchase plan that operates under Section 401 (a) of the Internal Revenue Code. The plan covers members of the Employees’ Retirement System, excluding legislators, correctional officers and Municipal Employees’ Retirement System police and fire employees who participate in Social Security. Judges and State police officers are also excluded from the plan.

FICA Alternative Retirement Income Security Program – a money purchase plan that operates under Section 401 (a) of the Internal Revenue Code. The plan covers any part-time, seasonal, or temporary employees of the State of Rhode Island hired after July 1, 2013, who are ineligible for participation in the Employees’ Retirement System of Rhode Island (ERSRI).

Other Employee Benefit Trust Funds

OPEB Trust Funds – established for the purpose of providing and administering OPEB benefits for retired employees of the State of Rhode Island and their dependents for the classes listed below.

State Employees – covers State employees and certain employees of the Narragansett Bay Commission, RI Airport Corporation, and RI Commerce Corporation.

Teachers – covers certified public school teachers electing to participate.

Judicial – covers judges and magistrates.

State Police – covers retired State police officers.

Legislators – covers retired and former members of the General Assembly.

Board of Education – covers certain members of the University and Colleges, primarily faculty.

191


Trust Funds

Private Purpose Trust Funds

Rhode Island Higher Education Savings Trust (RIHEST) administers the CollegeBoundfund which was established as part of the Rhode Island Tuition Savings Program, to enable residents of any state to save money on a tax-advantaged basis to pay qualified higher education expenses of their designated beneficiaries.

Touro Jewish Synagogue Fund accounts for the earnings on monies bequeathed to the State for the purpose of maintaining the Touro Jewish Synagogue.

192

Assets

Cash and cash equivalents $ 5,929 $ 3,917 $ 9,846

Advance held by claims processing agent 775 775

ReceivablesContributions 63,437 1,921 65,358Due from State for teachers 23,190 23,190Due from other plans 30 30Other 2,394 2,394Miscellaneous 199 199

Total receivables 89,250 1,921 91,171

Prepaid expenses 5,611 5,611

Investments, at fair valueEquity in pooled trust 7,525,308 178,159 7,703,467Other investments 516,133 516,133

Total investments 8,041,441 178,159 8,219,600

Total assets 8,142,231 184,772 8,327,003

Liabilities

Accounts payable 5,405 783 6,188Due to other plans 30 30Incurred but not reported claims 1,614 1,614Other 2,249 2,249

Total liabilities 5,435 4,646 10,081

Net position held in trust for pensionand other postemployment benefits $ 8,136,796 $ 180,126 $ 8,316,922

Trust Benefits Trust TotalsPension Employee

Other

State of Rhode Island and Providence PlantationsCombining Statement of Fiduciary Net Position

Pension and Other Employee Benefits Trust FundsFor the Fiscal Year Ended June 30, 2016


193


Member contributions $ 196,104 $ 8,101 $ 204,205Employer contributions 377,549 53,438 430,987Supplemental employer contributions 408 408State contributions for teachers 87,998 87,998Interest on service credits purchased 145 145Service credit transfer payments 13,406 13,406

Total contributions 675,610 61,539 737,149

Other income 111 1,696 1,807

Investment incomeNet appreciation in

fair value of investments (75,841) 6,745 (69,096)Interest 57,743 1,431 59,174Dividends 23,249 23,249Other investment income 10,996 10,996

16,147 8,176 24,323Less investment expense 20,146 74 20,220Net investment income (3,999) 8,102 4,103

Total additions 671,722 71,337 743,059Deductions

Retirement benefits 928,232 928,232Death benefits 3,482 3,482Distributions 9,225 9,225Refund of contributions 8,046 8,046Administrative expense 8,660 78 8,738Service credit transfers 13,406 13,406OPEB benefits 38,519 38,519

Total deductions 971,051 38,597 1,009,648Change in net position (299,329) 32,740 (266,589)

Net position held in trust for pensionand other postemployment benefits

Net position - beginning 8,436,125 147,386 8,583,511Net position - ending $ 8,136,796 $ 180,126 $ 8,316,922

Trust Benefits Trust TotalsPension Employee

State of Rhode Island and Providence PlantationsCombining Statement of Changes in Fiduciary Net Position

Pension and Other Employee Benefits Trust FundsFor the Fiscal Year Ended June 30, 2016

Other


194

Assets

Cash and cash equivalents $ 4,647 $ 1,149 $ 56 $ 61 $ 4 $ 12 $ $ $ 5,929

ReceivablesContributions 53,289 9,742 208 130 4 64 63,437Due from State for teachers 23,190 23,190Due from other plans 20 10 30Other 2,287 82 25 2,394Miscellaneous 121 78 199

Total receivables 78,907 9,824 208 130 92 89 89,250

Prepaid expenses 4,350 947 74 38 202 5,611

Investments, at fair valueEquity in Pooled Trust 5,715,519 1,346,707 116,042 60,221 583 286,236 7,525,308Other-Defined Contribution Plan 514,246 1,887 516,133

Total investments 5,715,519 1,346,707 116,042 60,221 583 286,236 514,246 1,887 8,041,441

Total assets 5,803,423 1,358,627 116,380 60,450 679 286,539 514,246 1,887 8,142,231

Liabilities

Accounts payable 4,380 751 63 32 125 54 5,405Due to other plans 10 20 30

Total liabilities 4,390 751 63 32 145 54 5,435

Net position held in trust for pension benefits $ 5,799,033 $ 1,357,876 $ 116,317 $ 60,418 $ 534 $ 286,485 $ 514,246 $ 1,887 $ 8,136,796

FICAMunicipal Alternative

JudicialRetirement

StatePolice

RetirementTeachers'

RetirementProgram

RetirementFundTrust

SurvivorsBenefit

Plan


For the Fiscal Year Ended June 30, 2016Pension Trust Funds


Employees'Judicial

BenefitsTotalsSystem Retirement Trust Trust

Employees'Retirement BenefitsDefined

ContributionPlan

195


Member contributions $ 90,525 $ 16,806 $ 2,035 $ 1,053 $ 134 $ 642 $ 83,417 $ 1,492 $ 196,104Employer contributions 297,638 46,597 4,005 2,410 140 642 26,117 377,549Supplemental employer contributions 408 408State contributions for teachers 87,998 87,998Interest on service credits purchased 109 36 145Service credit transfers (net) 7,286 6,120 13,406

Total contributions 483,964 69,559 6,040 3,463 274 1,284 109,534 1,492 675,610Investment income

Net appreciation (depreciation) inin fair value of investments (62,217) (13,048) (1,003) (522) (1) (2,713) 3,663 (75,841)

Interest 44,070 10,202 861 446 4 2,160 57,743Dividends 17,228 4,009 340 177 2 849 644 23,249Other investment income 8,366 1,936 164 85 1 410 8 26 10,996

7,447 3,099 362 186 6 706 4,315 26 16,147Less investment expense 15,358 3,570 303 157 1 757 20,146Net investment income (7,911) (471) 59 29 5 (51) 4,315 26 (3,999)

Miscellaneous revenue 39 65 7 111Total additions 476,092 69,153 6,099 3,492 279 1,233 113,856 1,518 671,722

DeductionsRetirement benefits 818,821 93,967 4,585 2,531 231 8,097 928,232Death benefits 2,879 603 3,482Distributions 9,225 9,225Refund of contributions 6,306 1,544 196 8,046Administrative expense 5,723 1,268 102 53 267 1,161 86 8,660Service credit transfers (net) 7,286 6,120 13,406

Total deductions 841,015 103,502 4,687 2,584 231 8,560 10,386 86 971,051

Net increase (decrease) (364,923) (34,349) 1,412 908 48 (7,327) 103,470 1,432 (299,329)

Net position held in trust for pension benefits

Net position - beginning 6,163,956 1,392,225 114,905 59,510 486 293,812 410,776 455 8,436,125Net position - ending $ 5,799,033 $ 1,357,876 $ 116,317 $ 60,418 $ 534 $ 286,485 $ 514,246 $ 1,887 $ 8,136,796

AlternativeRetirement

Program

JudicialRetirement

FundTrust

DefinedContribution

Plan

FICATeachers'Survivors

System Retirement Trust Trust TotalsRetirement Employees' Benefits Benefits Benefit

Plan

Employees' Municipal Retirement RetirementState Police Judicial


For the Fiscal Year Ended June 30, 2016Pension Trust Funds


196

Assets

Cash and cash equivalents $ 1,750 $ 753 $ 257 $ 612 $ 121 $ 424 $ 3,917

Advance held by claims processing agent 775 775

ReceivablesContributions receivable 1,527 255 1 138 1,921

Investments at fair value - equity in pooled trust 117,853 7,617 2,958 28,666 2,508 18,557 178,159

Total assets 121,905 8,370 3,215 29,533 2,630 19,119 184,772

Liabilities

Accounts payable 605 71 4 56 10 37 783Incurred but not reported claims 1,143 207 9 166 19 70 1,614Other 2,249 2,249

Total liabilities 3,997 278 13 222 29 107 4,646

Net position held in trust for otherpostemployment benefits $ 117,908 $ 8,092 $ 3,202 $ 29,311 $ 2,601 $ 19,012 $ 180,126


Other Employee Benefit Trust FundsFor the Fiscal Year Ended June 30, 2016

State Board ofState


TotalsEmployees EducationTeachers LegislatorsPoliceJudicial

197


Member contributions $ 4,587 $ 1,376 $ 359 $ 299 $ 183 $ 1,297 $ 8,101 Employer contributions 40,709 2,321 6,823 27 3,558 53,438

Total contributions 45,296 3,697 359 7,122 210 4,855 61,539

Amortization of advance contributionsOther income 1,270 144 23 147 23 89 1,696

Investment incomeNet appreciation in fair value of investments 4,469 272 111 1,094 94 705 6,745 Interest and dividends 937 67 26 231 22 148 1,431

5,406 339 137 1,325 116 853 8,176 Less investment expense (49) (3) (1) (12) (1) (8) (74)

Net investment income 5,357 336 136 1,313 115 845 8,102

Total additions 51,923 4,177 518 8,582 348 5,789 71,337

DeductionsBenefits 29,845 2,999 258 3,126 316 1,975 38,519 Administrative expense 63 5 2 1 7 78

Total deductions 29,908 3,004 258 3,128 317 1,982 38,597

Net increase (decrease) 22,015 1,173 260 5,454 31 3,807 32,740

Net position held in trust for otherpostemployment benefits

Net position - beginning 95,893 6,919 2,942 23,857 2,570 15,205 147,386

Net position - ending $ 117,908 $ 8,092 $ 3,202 $ 29,311 $ 2,601 $ 19,012 $ 180,126

PoliceJudicial TotalsEmployees EducationTeachers LegislatorsState Board of


Other Employee Benefit Trust FundsFor the Fiscal Year Ended June 30, 2016


State

198

AssetsReceivables

Plan participant units sold $ 9,125 $ $ 9,125Program investments sold 1,986 1,986Other 328 328

Total receivables 11,439 11,439

Investments, at fair value 6,693,485 2,542 6,696,027

Total assets 6,704,924 2,542 6,707,466

LiabilitiesAccounts payable 17,398 17,398

Total liabilities 17,398 17,398

Net positionRestricted for:

Tuition Savings Program 6,687,526 6,687,526Other 2,542 2,542

Total net position $ 6,687,526 $ 2,542 $ 6,690,068


Private Purpose Trust FundsFor the Fiscal Year Ended June 30, 2016


Tuition TouroSavings JewishProgram Synagogue Totals

199

AdditionsProgram participant subscriptions $ 765,916 $ $ 765,916Investment income

Net appreciation (depreciation) in fair value of investments (294,929) (181) (295,110)

Dividends 214,328 42 214,370Other investment income 145 145

Total additions 685,315 6 685,321Deductions

Program participant redemptions 1,351,248 1,351,248Administrative expense 63,856 119 63,975

Total deductions 1,415,104 119 1,415,223Change in net position:

Tuition Savings Program (729,789) (729,789)Other (113) (113)

Net position - beginning as restated 7,417,315 2,655 7,419,970

Net position - ending $ 6,687,526 $ 2,542 $ 6,690,068


Private Purpose TrustsFor the Fiscal Year Ended June 30, 2016


Tuition TouroSavings JewishProgram Synagogue Totals

200


Agency Funds

Agency Funds – used to report resources held by the State in a purely custodial capacity (assets equal liabilities).

HealthSource RI Trust– accounts for health and dental insurance premium payments from qualified employers and individuals, and payments for such premiums to issuers of qualified health and dental insurance plans offered through HealthSource RI.

RIPTA Health – accounts for contributions on behalf of the employees and retirees from the Rhode Island Public Transit Authority.

Statutory Deposits – accounts for deposits required from financial institutions, principally insurance companies, doing business within the State.

Court Deposits – accounts for deposits held by various State courts pending resolution of litigation between two or more parties.

201

HealthSource RI Trust

Cash and cash equivalents $ 1,935 $ 84,123 $ 83,530 $ 2,528

Total assets $ 1,935 $ 84,123 $ 83,530 $ 2,528

Deposits held for others $ 1,839 $ 83,542 $ 82,889 $ 2,492Accounts payable 96 581 641 36

Total liabilities $ 1,935 $ 84,123 $ 83,530 $ 2,528

RIPTA Health Fund

Cash and cash equivalents $ 1,479 $ 27,577 $ 27,152 $ 1,904Receivables 2,881 3,667 3,609 2,939

Total assets $ 4,360 $ 31,244 $ 30,761 $ 4,843

Deposits held for others $ 1,184 $ 557 $ $ 1,741Accounts payable 3,176 15,290 15,364 3,102


Statutory Deposits

Deposits held as security for entitiesdoing business in the State $ 54,841 $ 8,487 $ 6,116 $ 57,212

Total assets $ 54,841 $ 8,487 $ 6,116 $ 57,212

Deposits held for others $ 54,841 $ 8,487 $ 6,116 $ 57,212


Court Deposits

Cash and cash equivalents $ 12,589 $ 6,697 $ 8,836 $ 10,450Receivables 2,914 2,914

Total assets $ 12,589 $ 9,611 $ 11,750 $ 10,450

Deposits held for others $ 12,578 $ 2,836 $ 5,002 $ 10,412Accounts payable 11 2,142 2,115 38


Total - All Agency Funds

Cash and cash equivalents $ 16,003 $ 118,397 $ 119,518 $ 14,882Deposits held as security for entities

doing business in the State 54,841 8,487 6,116 57,212Receivables 2,881 6,581 6,523 2,939

Total assets $ 73,725 $ 133,465 $ 132,157 $ 75,033

Deposits held for others $ 70,442 $ 95,422 $ 94,007 $ 71,857Accounts payable 3,283 18,013 18,120 3,176


Balance BalanceJuly 1, 2015 Additions Deductions June 30, 2016

Liabilities

Assets

Liabilities

Assets

State of Rhode Island and Providence PlantationsCombining Statement of Changes in Fiduciary Assets and Liabilities

Agency FundsFor the Fiscal Year Ended June 30, 2016


Assets

Liabilities

Liabilities

Assets

Assets

Liabilities

202

State of Rhode IslandCombining Statement of Net Position

Nonmajor Component UnitsJune 30, 2016



Cash and cash equivalents $ 2,645 $ 10,445 $ $ 2,569 $ 350 $ 1,753Investments 400Receivables (net) 962 350 1,262 1Restricted assets:

Cash and cash equivalents 34,905 185,418Investments 1,581 11,271Receivables (net) 168Other assets 38,247

Due from primary government 2,163 519 3,539Due from other governments 619Due from other component units 82InventoriesOther assets 10 19 344 3,456 3

Total current assets 6,567 11,945 39,538 242,842 432 1,757Noncurrent Assets:

InvestmentsReceivables (net) 11,459Restricted assets:

Cash and cash equivalents 631Investments 207,878Receivables (net)Other assets 3,938 1,390,857

Capital assets - nondepreciable 192Capital assets - depreciable (net) 2,682 430 1,058Due from other component unitsOther assets, net of amortization 150,374

Total noncurrent assets 6,620 430 1,881 1,760,568

Total assets 13,187 12,375 41,419 2,003,410 432 1,757Deferred outflows of resources 8,379 147 2,902Liabilities and deferred inflows


Accounts payable 2,995 1,719 1,041 399 39 9Due to other component units 16 92Unearned revenue 330 5Other liabilities 48 163,148Current portion of long-term debt 208 40 115,092 453

Total current liabilities 3,203 2,089 1,089 278,639 60 554Noncurrent liabilities:

Unearned revenue 39Notes payable 30,701Loans payableObligations under capital leases 66Net pension liability 31,875 2,954Net OPEB obligation 7,966 4,158Other liabilities 1,704 210,074 1,452Compensated absences 793 112 1,369Bonds payable 1,180,770

Total noncurrent liabilities 40,700 4,770 1,427,072 39 1,452Total liabilities 43,903 2,089 5,859 1,705,711 99 2,006

Deferred inflows of resources 4,128 350Net position (deficit)Net investment in capital assets 2,463 390 1,250 8,701Restricted for:

Debt 210,156Other 1,581 116 34,107 1,922

Unrestricted (30,509) 9,780 79,822 333 (249)Net position (deficit) $ (26,465) $ 10,286 $ 35,357 $ 300,601 $ 333 $ (249)

(continued)

RIHMFC RIIFCCFSD DHEA RIIRBAThe Met

203

State of Rhode IslandCombining Statement of Net Position

Nonmajor Component UnitsJune 30, 2016



Cash and cash equivalentsInvestmentsReceivables (net)Restricted assets:


Due from primary governmentDue from other governmentsDue from other component unitsInventoriesOther assets

Total current assetsNoncurrent Assets:

InvestmentsReceivables (net)Restricted assets:


Capital assets - nondepreciableCapital assets - depreciable (net)Due from other component unitsOther assets, net of amortization


Total assetsDeferred outflows of resourcesLiabilities and deferred inflows


Accounts payableDue to other component unitsUnearned revenueOther liabilitiesCurrent portion of long-term debt

Total current liabilitiesNoncurrent liabilities:

Unearned revenueNotes payableLoans payableObligations under capital leasesNet pension liabilityNet OPEB obligationOther liabilitiesCompensated absencesBonds payable

Total noncurrent liabilitiesTotal liabilities

Deferred inflows of resourcesNet position (deficit)Net investment in capital assetsRestricted for:

DebtOther

UnrestrictedNet position (deficit)

$ 31,955 $ 774 $ 32,010 $ 1,033 $ 83,5349,493 9,893

7,041 1,541 11,424 294 22,875

953 217,241 21,893 460,41080,725 93,57767,056 262 67,486

38,2476,221

619235 317

3,603 3,603437 109 43 4,421

43,036 3,612 408,456 33,018 791,203

240 240114 931 12,504

2,473 3,10490,785 298,663

1,043,990 2,138 1,046,1281,394,795

33,056 59,132 92,38041,278 113,501 125 28 159,102

1,478 1,4784,496 154,870

172,088 174,225 1,044,115 3,337 3,163,264

215,124 177,837 1,452,571 36,355 3,954,467724 7,553 19,705

7,801 1,089 563 189 15,844108

1,078 1,4135,606 9,332 4,079 182,2134,075 1,775 58,010 179,653

17,482 3,942 67,905 4,268 379,231

191 2302,893 33,594

3,522 3,522332 398

2 34,831664 12,788

91,545 425 305,2002,274

25,318 3,917 802,913 2,012,918120,420 7,964 803,338 2,405,755137,902 11,906 871,243 4,268 2,784,986

503 1,104 6,085

54,332 163,088 125 28 230,377

210,1562,052 531,687 20,215 591,680

20,838 3,064 55,965 11,844 150,888$ 77,222 $ 166,152 $ 587,777 $ 32,087 $ 1,183,101

(concluded)

TotalsQDCRIRRC RIIB RIHEBC

204

State of Rhode Island and Providence PlantationsCombining Statement of Activities

Nonmajor Component UnitsFor the Fiscal Year Ended June 30, 2016


Expenses $ 50,661 $ 15,104 $ 17,371 $ 110,539 $ 68 $ 544 $ 53,780 $ 11,988 $ 37,242 $ 3,648 $ 300,945

Program revenues:Charges for services 309 5,413 6,112 93,250 43 94 55,240 12,121 6,955 2,433 181,970Operating grants and contributions 47,025 11,770 8,027 18,622 3,140 21,194 109,778Capital grants and contributions 517 41,959 42,476

Total program revenues 47,334 17,183 14,139 111,872 43 94 55,240 12,638 52,054 23,627 334,224

Net (Expenses) Revenues (3,327) 2,079 (3,232) 1,333 (25) (450) 1,460 650 14,812 19,979 33,279

General revenues:Interest and investment earnings 16 125 5,692 7 3,045 8 31,300 75 40,268Miscellaneous revenues 1,045 44 116 2,464 3,669

Total general revenues 1,045 60 241 5,692 7 5,509 8 31,300 75 43,937

Special items 38,348 38,348

Change in net position (2,282) 2,139 35,357 7,025 (25) (443) 6,969 658 46,112 20,054 115,564

Net position (deficit) - beginning as restated (24,183) 8,147 293,576 358 194 70,253 165,494 541,665 12,033 1,067,537

Net position (deficit) - ending $ (26,465) $ 10,286 $ 35,357 $ 300,601 $ 333 $ (249) $ 77,222 $ 166,152 $ 587,777 $ 32,087 $ 1,183,101

TotalsQDC RIIB RIHEBCCFSD DHEA RIIRBA RIRRCRIHMFC RIIFCThe Met

205


Statistical Section

2016




Statistical Section

Index

This part of the State’s comprehensive annual financial report presents detailed information as to the context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the State’s overall financial health.

Page Financial Trends Information 207

These schedules contain trend information to help the reader understand how the State’s financial performance and well-being have changed over time.

Revenue Capacity Information 213

These schedules contain information to help the reader assess the State’s most significant taxes, income and sales.

Debt Capacity Information 220

These schedules present information to help the reader assess the affordability of the State’s current levels of outstanding debt and the State’s ability to issue additional debt in the future.

Demographic and Economic Information 222

These schedules offer demographic and economic indicators to help the reader understand the environment within which the State’s financial activities take place.

Operating Information 224

These schedules contain service and infrastructure data to help the reader understand how the information in the State’s financial report relates to the services the State provides and the activities it performs.

Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports of the relevant year.

Note: When applicable, financial data has been reported at restated amounts in the Statistical Section.

206

Governmental activitiesNet investment in capital assets $ 3,063,627 $ 2,934,439 $ 2,706,209 $ 2,486,783 $ 2,302,368 $ 2,115,001 $ 2,064,231 $ 1,958,718 $ 1,877,872 $ 1,691,793Restricted * 741,971 841,777 799,274 775,758 696,743 553,421 538,104 507,999 496,630 373,788Unrestricted * (4,306,312) (4,380,849) (4,454,382) (1,436,799) (1,458,163) (1,529,992) (1,644,279) (1,622,296) (1,498,314) (1,082,664)

Total governmental activities net position $ (500,714) $ (604,633) $ (948,899) $ 1,825,742 $ 1,540,948 $ 1,138,430 $ 958,056 $ 844,421 $ 876,188 $ 982,917

Business-type activitiesNet investment in capital assets $ (57,493) $ (61,956) $ (62,060) $ (67,394) $ (64,492) $ (63,156) $ (61,806) $ (59,453) $ (60,902) $ (109,435)Restricted 283,901 155,682 33,795 8,340 9,308 11,036 13,161 20,130 198,928 294,395Unrestricted (19,970) (21,312) (19,991) (86,571) (157,396) (159,388) (122,955) (7,251) (15,345) (16,616)

Total business-type activities net position $ 206,438 $ 72,414 $ (48,256) $ (145,625) $ (212,580) $ (211,508) $ (171,600) $ (46,574) $ 122,681 $ 168,344

Primary governmentNet investment in capital assets $ 3,006,134 $ 2,872,483 $ 2,644,149 $ 2,419,389 $ 2,237,876 $ 2,051,845 $ 2,002,425 $ 1,899,265 $ 1,816,970 $ 1,582,358Restricted * 1,025,872 997,459 833,069 784,098 706,051 473,787 497,092 440,345 626,516 668,183Unrestricted * (4,326,282) (4,402,161) (4,474,373) (1,523,370) (1,615,559) (1,598,710) (1,713,061) (1,541,763) (1,444,617) (1,099,280)

Total primary government net position $ (294,276) $ (532,219) $ (997,155) $ 1,680,117 $ 1,328,368 $ 926,922 $ 786,456 $ 797,847 $ 998,869 $ 1,151,261

* Reclassifications from fiscal years 2010 through 2015 were made to conform with current presentation.

(expressed in thousands)

2014 20132015 2012

(accrual basis of accounting)


20072011 2010 2009 2008

Fiscal Year

2016

Last Ten Fiscal YearsSchedule of Net Position by Components

207

ExpensesGovernmental activities:

General government $ 769,469 $ 695,611 $ 736,911 $ 625,081 $ 653,003 $ 644,194 $ 741,329 $ 754,386 $ 894,766 $ 858,729Human services 3,652,875 3,631,236 3,302,590 3,038,841 2,970,269 3,013,081 2,900,673 2,719,346 2,736,956 2,519,745Education 1,595,289 1,472,786 1,399,347 1,364,575 1,334,355 1,332,453 1,273,985 1,278,391 1,361,310 1,320,384Public safety 545,329 478,854 478,826 473,580 468,098 436,940 418,485 414,830 428,351 391,354Natural resources 87,537 83,979 80,690 76,730 85,039 80,360 73,551 75,103 90,087 91,758Transportation 343,270 283,085 298,626 300,639 268,523 300,366 305,460 324,007 240,644 281,518IntergovernmentalInterest and other charges 83,899 121,845 129,421 129,714 145,964 148,850 142,924 136,737 133,298 107,211

Total governmental activities 7,077,668 6,767,396 6,426,411 6,009,160 5,925,251 5,956,244 5,856,407 5,702,800 5,885,412 5,570,699

Business-type activities:Lottery 507,199 484,293 462,153 397,625 399,421 368,870 358,127 356,046 365,333 342,662Convention Center 48,905 48,628 49,255 48,437 49,439 32,986 50,732 48,764 41,007 42,859Employment Security 157,018 167,527 257,145 396,909 559,440 645,979 783,878 573,288 259,246 210,060

Total business-type activities 713,122 700,448 768,553 842,971 1,008,300 1,047,835 1,192,737 978,098 665,586 595,581Total primary government expenses $ 7,790,790 $ 7,467,844 $ 7,194,964 $ 6,852,131 $ 6,933,551 $ 7,004,079 $ 7,049,144 $ 6,680,898 $ 6,550,998 $ 6,166,280

Program RevenuesGovernmental activities:

Charges for services:General government $ 229,659 $ 209,005 $ 212,275 $ 220,376 $ 212,750 $ 185,918 $ 179,646 $ 168,210 $ 178,590 $ 132,152Human services 266,091 246,604 229,047 227,158 204,287 210,905 198,555 187,973 167,241 125,901Education 29,749 29,775 27,617 26,840 26,044 22,022 18,263 8,335 36,241 11,180Public safety 45,245 39,709 44,192 47,075 37,339 34,389 35,272 32,770 36,194 49,821Natural resources 28,655 29,258 27,259 28,975 26,060 29,046 29,746 31,385 31,753 31,932Transportation 25,354 22,806 7,199 1,076 1,660 372 744 181 (207) 875

Operating grants and contributions 2,677,431 2,666,243 2,403,772 2,211,800 2,194,892 2,387,540 2,361,446 2,114,821 1,827,704 1,716,318Capital grants and contributions 178,628 217,604 228,649 190,551 210,720 162,032 162,090 103,515 112,712 151,528

Total governmental activitiesprogram revenues 3,480,812 3,461,004 3,180,010 2,953,851 2,913,752 3,032,224 2,985,762 2,647,190 2,390,228 2,219,707

Business-type activities:Charges for services 1,177,083 1,163,752 1,127,206 1,055,070 1,056,285 985,556 947,825 913,333 923,694 883,893Operating grants and contributions 1,558 839 53,146 166,164 278,671 358,932 418,270 194,857 3,285 4,607

Total business-type activitiesprogram revenues 1,178,641 1,164,591 1,180,352 1,221,234 1,334,956 1,344,488 1,366,095 1,108,190 926,979 888,500

Total primary governmentprogram revenues $ 4,659,453 $ 4,625,595 $ 4,360,362 $ 4,175,085 $ 4,248,708 $ 4,376,712 $ 4,351,857 $ 3,755,380 $ 3,317,207 $ 3,108,207

Net (Expenses)/RevenuesGovernmental activities $ (3,596,856) $ (3,306,392) $ (3,246,401) $ (3,055,309) $ (3,011,499) $ (2,924,020) $ (2,870,645) $ (3,055,610) $ (3,495,184) $ (3,350,992)Business-type activities 465,519 464,143 411,799 378,263 326,656 296,653 173,358 130,092 261,393 292,919Total primary government net expenses $ (3,131,337) $ (2,842,249) $ (2,834,602) $ (2,677,046) $ (2,684,843) $ (2,627,367) $ (2,697,287) $ (2,925,518) $ (3,233,791) $ (3,058,073)

(Continued)

Fiscal Year

20072011

State of Rhode Island and Providence PlantationsSchedule of Changes in Net Position

Last Ten Fiscal Years(accrual basis of accounting)


2016 2015 200820122014 2013 2010 2009

208

Fiscal Year

20072011

State of Rhode Island and Providence PlantationsSchedule of Changes in Net Position

Last Ten Fiscal Years(accrual basis of accounting)


2016 2015 200820122014 2013 2010 2009General Revenue and Other Changes

in Net PositionGovernmental activities:

Taxes $ 3,266,347 $ 3,206,935 $ 2,980,387 $ 2,870,969 $ 2,824,368 $ 2,665,169 $ 2,577,519 $ 2,588,417 $ 2,820,709 $ 2,842,828Interest and investment earnings 3,134 3,212 4,852 4,893 4,304 5,561 4,309 9,435 32,466 37,539Miscellaneous 90,836 107,382 108,398 143,240 118,506 102,478 91,110 95,758 121,273 106,543Gain on sale of capital assets 4,693 993 953 3,757 1,656 3,026Special items (5,000)Transfers 335,765 345,190 332,824 333,804 344,386 331,186 318,772 315,408 324,928 304,906Payments from component units 7,228 13,569 39,284 10,108


Business-type activities:Interest and investment earnings 164 186 109 117 94 79 164 4,279 9,531 12,137Miscellaneous 4,106 1,531 31,208 24,490 16,564 (5,454) 20,224 11,782 8,341 8,137Transfers (335,765) (345,190) (332,824) (333,804) (344,386) (331,186) (318,772) (315,408) (324,928) (304,906)

Total business-type activities (331,495) (343,473) (301,507) (309,197) (327,728) (336,561) (298,384) (299,347) (307,056) (284,632)Total primary government 3,369,280 3,315,239 3,125,907 3,047,466 2,963,836 2,767,833 2,700,554 2,724,896 3,034,630 3,017,292

Changes in Net PositionGovernmental activities 103,919 352,320 181,013 301,354 280,065 180,374 128,293 (31,367) (153,498) (49,068)Business-type activities 134,024 120,670 110,292 69,066 (1,072) (39,908) (125,026) (169,255) (45,663) 8,287Total primary government $ 237,943 $ 472,990 $ 291,305 $ 370,420 $ 278,993 $ 140,466 $ 3,267 $ (200,622) $ (199,161) $ (40,781)

(Concluded)

209

General FundNonspendable $ $ $ $ $ $ 53,353 $ 49,302

* Restricted 133,193 134,231 120,898 110,178 78,940 67,592 49,624 Unrestricted

Committed 3,975 2,561 4,770 4,035 22,793 5,956 4,285 Assigned 137,114 130,964 72,005 105,639 97,639 8,425

* Unassigned 235,096 234,131 197,706 181,282 173,782 135,574 82,239

Total General Fund $ 509,378 $ 501,887 $ 395,379 $ 401,134 $ 373,154 $ 270,900 $ 185,450

All Other Governmental FundsNonspendable $ 174 $ 174 $ 174 $ 174 $ 174 $ 174 $ 174

** Restricted 614,687 660,845 615,667 660,198 619,799 528,251 681,782Unrestricted

** Committed 39,175 10,727 4,118 163 1,742 1,448 3,366** Assigned 255 318 284 19,704

Unassigned (1,519) (1,486) (4,028) (4,113) (4,717) (5,043) (6,160)Total All Other Governmental Funds $ 652,517 $ 670,260 $ 615,931 $ 656,677 $ 617,316 $ 525,114 $ 698,866

General FundReserved $ 132,245 $ 149,605 $ 144,166Unreserved (62,286) (42,950)

Total General Fund $ 69,959 $ 106,655 $ 144,166

All Other Governmental FundsReserved $ 274,180 $ 264,727 $ 260,607Unreserved, reported in:

Special Revenue Funds 93,498 7,805 155,482Permanent Funds 1,368 2,173 1,186Capital Projects Funds 459,489 303,965 360,026

Total All Other Governmental Funds $ 828,535 $ 578,670 $ 777,301

Beginning in fiscal year 2010, the fund balance categories were reclassified due to the implementation ofGASB Statement 54. Fund balance has not been reclassified for prior years.

* In fiscal year 2016 it was determined that the State Budget Reserve and Cash Stabilization Account should be Unassigned rather than Restricted.Prior year balances have been restated to agree to this format.

** The 2015 balances were adjusted to agree to the 2016 presentation. There was no effect on years prior to 2015.

2012 2011 20102016 2015 2014 2013

State of Rhode Island and Providence PlantationsSchedule of Fund Balances of Governmental Funds

Last Ten Fiscal Years(modified accrual basis of accounting)

20072009 2008


Fiscal Year

Fiscal Year

210

Revenues:Taxes $ 3,266,616 $ 3,210,123 $ 2,975,016 $ 2,868,503 $ 2,814,331 $ 2,664,420 $ 2,577,406 $ 2,589,751 $ 2,818,085 $ 2,848,284Licenses, fines, sales, and services 380,376 348,214 332,655 320,767 313,724 308,564 311,040 295,662 323,329 242,743Departmental restricted revenue 244,754 229,492 223,314 222,027 194,279 174,563 150,357 134,029 125,883 110,059Federal grants 2,865,006 2,889,963 2,630,678 2,402,444 2,411,262 2,541,335 2,518,048 2,218,816 1,936,610 1,869,336Income from investments 3,017 3,156 4,809 4,840 4,280 5,537 4,207 9,014 31,522 36,068Other revenues 100,356 106,872 115,804 147,090 121,202 100,164 93,687 104,665 122,723 103,099

Total operating revenues 6,860,125 6,787,820 6,282,276 5,965,671 5,859,078 5,794,583 5,654,745 5,351,937 5,358,152 5,209,589Expenditures:

Current:General government 764,066 697,289 656,826 634,010 635,554 620,110 714,861 755,366 803,561 806,865Human services 3,694,123 3,661,964 3,325,538 3,042,705 2,969,166 3,009,097 2,884,419 2,711,167 2,727,534 2,512,286Education 1,467,236 1,403,807 1,357,903 1,330,388 1,282,063 1,287,733 1,239,258 1,216,208 1,289,687 1,267,255Public safety 504,217 490,981 478,108 463,734 459,114 428,687 394,860 401,976 410,605 396,029Natural resources 78,307 79,941 76,127 70,202 75,156 71,818 67,435 68,941 72,984 81,518Transportation 386,712 373,715 383,816 373,887 399,512 367,496 306,730 299,881 244,638 310,019

Capital outlays 185,361 171,469 139,848 130,415 111,044 138,843 250,653 215,600 264,713 269,550IntergovernmentalDebt service:

Principal 103,310 190,784 176,885 176,970 164,245 154,475 163,063 157,817 143,368 115,752Interest and other charges 99,802 140,728 122,663 126,852 135,806 138,066 139,723 132,813 131,575 128,527

Total operating expenditures 7,283,134 7,210,678 6,717,714 6,349,163 6,231,660 6,216,325 6,161,002 5,959,769 6,088,665 5,887,801

Excess (deficiency) of revenuesover (under) expenditures (423,009) (422,858) (435,438) (383,492) (372,582) (421,742) (506,257) (607,832) (730,513) (678,212)

(Continued)


State of Rhode Island and Providence PlantationsSchedule of Changes in Fund Balances of Governmental Funds


Fiscal Year

2016 2015 2014 2013 2012 20072011 2010 2009 2008

211


State of Rhode Island and Providence PlantationsSchedule of Changes in Fund Balances of Governmental Funds


Fiscal Year

2016 2015 2014 2013 2012 20072011 2010 2009 2008

Other financing sources (uses):Issuance of bonds and notes 72,000 121,125 53,150 81,400 145,035 155,665 427,180 131,755 314,852Issuance of refundings and

other escrow assets 459,235 830,139 78,700 88,175 146,730 78,960 12,445 46,570 74,835Capital leases 5,021 49,495 26,690 31,980 54,610 59,185 45,325Premium and accrued interest 73,516 82,553 14,719 27,507 45,437 9,839 8,100 7,241 9,930Transfers in 572,569 622,520 566,076 592,804 581,679 545,229 586,025 622,212 724,428 828,885Payments from component units 7,228 13,568 39,284 10,108Payment to refunded bonds

escrow agent (532,780) (866,168) (91,991) (101,172) (172,094) (84,769) (12,697) (111,253) (78,198)Discount on issuance of debt (66) (4)Proceeds from termination of investment

contracts 26,361Transfers out (236,804) (277,330) (231,717) (264,571) (235,253) (211,789) (261,473) (304,351) (403,012) (522,631)

Total other financing sources (uses) 412,757 588,695 388,937 450,833 543,514 333,440 491,475 821,001 494,194 683,106

Special items (5,000)

Net change in fund balances $ (10,252) $ 160,837 $ (46,501) $ 67,341 $ 170,932 $ (88,302) $ (14,782) $ 213,169 $ (236,319) $ 4,894

Debt Service as a Percentage of Noncapital Expenditures 3.5% 4.8% 4.7% 5.0% 5.1% 5.0% 5.0% 4.9% 5.0% 4.7%

The capital outlay amount used to calculate the percentage is from the Reconciliation of the Statement of Revenues, Expenditures,

Capital outlay 378,935 327,792 360,267 315,644 264,770 230,746 319,509 185,636 227,169 318,076

A separate calculation has been done to obtain the interest expense.

Interest expense 138,220 138,220 124,498 125,457 131,793 137,768 138,285 126,935 127,987 126,918

(Concluded)Certain prior year amounts have been reclassified to conform to the current year presentation.

and Changes in Fund Balances of the Governmental Funds to the Statement of Activities.

212

Taxable Sales By Industry:

Grocery, Food Stores, Delis, Bakeries $ 1,193.72 $ 1,162.49 $ 1,188.56 $ 1,097.36 $ 1,091.81 $ 1,093.34 $ 1,084.78 $ 1,080.13 $ 1,073.75 $ 1,052.45 Restaurants and Bars 2,472.30 2,310.88 2,198.74 2,113.00 1,983.05 1,939.09 1,874.93 1,860.96 1,912.54 1,803.19 Room Rentals - Motels, Hotels 652.16 503.30 429.10 530.74 388.82 407.15 491.30 587.55 574.25 450.46 Utilities - Telephone, Electric, Gas, Water 591.87 673.23 600.82 617.53 583.28 588.48 589.94 641.09 636.72 668.28 Total $ 4,910.05 $ 4,649.90 $ 4,417.22 $ 4,358.63 $ 4,046.96 $ 4,028.06 $ 4,040.95 $ 4,169.73 $ 4,197.26 $ 3,974.38

Direct sales tax rate 7% 7% 7% 7% 7% 7% 7% 7% 7% 7%

Data is presented only for taxable sales of industries tracked by the Division of Taxation.


20062011 2010 2009 2008

Schedule of Taxable Sales by IndustryPrior Ten Calendar Years

(expressed in millions)

20072015 2014 2013 2012

Calendar Year

213

Farm Earnings $ 23 $ 21 $ 16 $ 15 $ 15 $ 14 $ 17 $ 17 $ 17 $ 23 Private Earnings Forestry, Fishing and Other (D) (D) 47 46 (D) (D) (D) 40 41 44Mining (D) (D) 18 17 (D) (D) (D) 13 18 19Utilities 172 158 143 150 165 165 160 149 161 131Construction 1,837 1,747 1,739 1,650 1,575 1,558 1,523 1,565 1,705 1,810Manufacturing 3,116 3,046 2,835 2,750 2,822 2,797 2,769 2,683 3,062 3,240Wholesale Trade 1,531 1,510 1,529 1,473 1,394 1,378 1,346 1,309 1,396 1,441Retail Trade 2,063 1,977 1,861 1,847 1,786 1,811 1,799 1,727 1,804 1,907Transportation and warehousing 605 591 596 598 558 562 521 500 519 515Information 1,377 1,383 995 1,050 1,087 1,089 998 953 927 889Finance and Insurance 3,027 2,975 2,819 2,657 2,702 2,560 2,549 2,262 2,194 2,131Real Estate and Rental and Leasing 578 544 478 456 380 430 369 350 353 379Professional, scientific, technical services 2,783 2,621 2,533 2,387 2,305 2,300 2,192 2,201 2,344 2,161Management of companies and enterprises 1,844 1,602 1,602 1,426 1,247 1,256 1,198 1,054 1,189 1,139Administrative and waste services 1,335 1,259 1,233 1,122 1,046 1,064 1,015 951 988 973Educational services 1,404 1,344 1,293 1,235 1,239 1,264 1,244 1,196 1,138 1,072Health care and social assistance 5,181 5,056 5,039 4,850 4,594 4,742 4,723 4,523 4,362 4,127Arts, entertainment, and recreation 406 374 333 302 296 291 285 277 286 289Accommodation and food services 1,277 1,197 1,126 1,072 995 1,001 945 903 949 954Other services, except public administration 1,229 1,189 1,177 1,135 1,060 1,100 1,084 1,063 1,089 1,166Government and Government Enterprises Federal/Civilian 1,226 1,160 1,117 1,132 1,200 1,114 1,103 1,031 976 955Military 470 472 520 509 636 508 513 494 475 447State and Local 4,225 4,169 4,199 4,162 3,931 4,149 4,140 3,956 4,048 3,936Total Personal Income by Industry* $ 35,709 $ 34,395 $ 33,248 $ 32,040 $ 31,033 $ 31,153 $ 30,491 $ 29,218 $ 30,038 $ 29,748

* Total Personal Income by Industry may not sum due to inclusion of non-disclosed data in total amount.

Source: US Bureau of Economic Analysis (D) Not shown to avoid disclosure of confidential information.

2009 20082011 20102015 2013 20122014 2007 2006Calendar Year

State of Rhode Island and Providence PlantationsSchedule of Personal Income by Industry

Prior Ten Calendar Years(expressed in millions)

214

Personal Income Tax (PIT) Revenue $ 1,228 $ 1,116 $ 1,086 $ 1,060 $ 1,021 $ 898 $ 941 $ 1,074 $ 1,065 $ 997Personal Income 52,006 49,683 49,434 48,184 46,881 45,268 43,471 44,144 43,126 41,258PIT Revenue as a Percent of Personal Income 2.36% 2.25% 2.20% 2.20% 2.18% 1.98% 2.16% 2.43% 2.47% 2.42%

Source: Office of Revenue AnalysisIncludes wages, interest, dividends, rents,pensions and transfer payments.

2015 2014 2013 2007 20062012 2011 2010 2009 2008Fiscal Year

Schedule of Personal Income Tax Revenue as a Percent of Personal IncomePrior Ten Fiscal Years(expressed in millions)


215

Tax Year 2015All Filing Status Types Tax Rate 3.75% 4.75% 5.99%

Income Bracket $ 0 - $60,550 $60,550 - $137,650 over $137,650


Income Bracket $ 0 - $59,600 $59,600 - $133,500 over $133,500


Income Bracket $ 0 - 58,600 $58,600 - $133,250 over $133,250


Income Bracket $ 0 - 57,150 $57,150 - $129,900 over $129,900


Income Bracket $ 0 - 55,000 $55,000 - 125,000 over $125,000

Tax Year 2010Single Filing Status Tax Rate 3.75% 7.00% 7.75% 9.00% 9.90%

Income Bracket $ 0 - 34,000 $34,000 - 82,400 $82,400 - 171,850 $171,850 - 373,650 over $ 373,650

Married Filing Joint Filing Status Tax Rate 3.75% 7.00% 7.75% 9.00% 9.90%Income Bracket $ 0 - 56,800 $ 56,800 - 137,300 $ 137,300 - 209,250 $ 209,250 - 373,650 over $ 373,650

Married Filing Separate Filing Status Tax Rate 3.75% 7.00% 7.75% 9.00% 9.90%Income Bracket $ 0 - 28,400 $ 28,400 - 68,650 $ 68,650 - 104,625 $104,625 - 186,825 over $ 186,825

Head of Household Filing Status Tax Rate 3.75% 7.00% 7.75% 9.00% 9.90%Income Bracket $ 0 - 45,550 $ 45,550 - 117,650 $ 117,650 - 190,550 190,550 - 373,650 over $373,650


Income Bracket $ 0 - 33,950 $ 33,950 - 82,250 $ 82,250 - 171,550 $ 171,550 - 372,950 over $ 372,950





Income Bracket $ 0 - 32,550 $32,550 - 78,850 $ 78,850 - 164,550 $ 164,550 - 357,700 over $ 357,700




(Continued)

Tax Rates on the Portion of Taxable Income in Ranges

State of Rhode Island and Providence PlantationsSchedule of Personal Income Tax Rates

Prior Ten Calendar Years

216

State of Rhode Island and Providence PlantationsSchedule of Personal Income Tax Rates





Married Filing Separate Filing Status Tax Rate 3.75% 7.00% 7.75% 9.00% 9.90%Income Bracket $ 0 - 26,575 $ 26,575 - 64,250 $ 64,250 - 97,925 $ 97,925 - 174,850 over $ 174,850

Head of Household Filing Status Tax Rate 3.75% 7.00% 7.75% 9.00% 9.90%Income Bracket $ 0 - 42,650 $ 42,650 - 110,100 $ 110,100 - 178,350 $ 178,350 - 349,700 over $ 349,700




Married Filing Separate Filing Status Tax Rate 3.750% 7.000% 7.750% 9.000% 9.900%Income Bracket $ 0 - 25,600 $ 25,600 - 61,850 $ 61,850 - 94,225 $ 94,225 - 168,275 over $ 168,275

Head of Household Filing Status Tax Rate 3.750% 7.000% 7.750% 9.000% 9.900%Income Bracket $ 0 - 41,050 $ 41,050 - 106,000 $ 106,000 - 171,650 $ 171,650 - 336,550 over $ 336,550

Source: Department of Revenue - Division of Taxation (Concluded)

217

Tax Year 2014Number Percentage Personal Income Percentage

Federal AGI of Filers of Total Tax Liability of Total$0 - $25,000 185,935 37.55% $ 14,665,246 1.34%$25,001 - $50,000 114,881 23.21% 82,902,886 7.56%$50,001 - $75,000 68,668 13.87% 109,495,169 10.00%$75,001 - $100,000 44,097 8.91% 109,097,854 9.96%$100,001 - $200,000 63,469 12.82% 296,654,641 27.08%$200,001 - $500,000 14,888 3.01% 216,813,938 19.79%$500,001 - $1,000,000 2,126 0.43% 80,900,417 7.39%$1,000,001 and greater 972 0.20% 184,862,456 16.88%

495,036 100.00% $ 1,095,392,607 100.00%



488,190 100.00% $ 1,008,556,449 100.00%



483,437 100.00% $ 1,016,502,611 100.00%



480,788 100.00% $ 969,924,538 100.00%



465,434 100.00% $ 894,193,156 100.00%(Continued)

State of Rhode Island and Providence PlantationsSchedule of Resident Personal Income Tax Filers & Liability by AGI

Tax Years 2005 through 2014

218

State of Rhode Island and Providence PlantationsSchedule of Resident Personal Income Tax Filers & Liability by AGI

Tax Years 2005 through 2014



467,439 100.00% $ 844,486,431 100.00%



475,759 100.00% $ 939,718,650 100.00%



483,432 100.00% $ 1,018,170,977 100.00%



475,357 100.00% $ 1,029,965,685 100.00%



473,101 100.00% $ 973,376,774 100.00%

Source: Department of Revenue - Division of Taxation (Concluded)

219

Governmental ActivitiesGeneral obligation bonds $ 1,051,810 $ 1,022,895 $ 1,074,750 $ 1,103,945 $ 1,110,585 $ 1,049,400 $ 1,118,030 $ 1,036,189 $ 997,398 $ 916,531Revenue bonds (blended component units) 695,046 716,201 744,821 765,161 779,426 795,161 807,731 828,481 867,776 902,871Capital leases 214,321 235,130 207,595 232,975 233,800 224,045 244,805 269,340 236,060 256,865Special purpose bonds 391,240 435,600 415,955 468,730 519,060 567,190 613,355 658,550 358,065 390,110


Business-type ActivitiesRevenue bonds 203,880 215,210 226,900 236,960 250,510 259,620 268,280 275,810 270,960 279,935

Total primary government $ 2,556,297 $ 2,625,036 $ 2,670,021 $ 2,807,771 $ 2,893,381 $ 2,895,416 $ 3,052,201 $ 3,068,370 $ 2,730,259 $ 2,746,312

Debt as a Percentage of Personal Income 4.8% 5.3% 5.4% 5.9% 6.1% 6.3% 7.1% 7.1% 6.9% 6.2%Amount of Debt Per Capita $ 2 $ 2 $ 3 $ 3 $ 3 $ 3 $ 3 $ 3 $ 3 $ 3

2016 2011

Fiscal Year

State of Rhode Island and Providence PlantationsSchedule of Ratios of Outstanding Debt by Type

Last Ten Fiscal Years(expressed in thousands)

2007200820142015 2009201020122013

220

Revenue Bonds-Tobacco Settlement Financing CorporationRevenue:

Tobacco settlement revenue, cash basis $ 47,432 $ 45,295 $ 51,757 $ 46,692 $ 49,944 $ 50,166 $ 48,620 $ 58,039 $ 53,247 $ 44,025Investment income 50 1,436 3,300 3,376 3,234 4,354 3,410 3,995 4,123 3,566Total revenue 47,482 46,731 55,057 50,068 53,178 54,520 52,030 62,034 57,370 47,591

Less: operating expenses 141 126 62 33 74 74 69 99 33 54Net available revenue $ 47,341 $ 46,605 $ 54,995 $ 50,035 $ 53,104 $ 54,446 $ 51,961 $ 61,935 $ 57,337 $ 47,537

Debt serviceInterest and required principal payments (c) $ 38,139 $ 35,633 $ 35,229 $ 36,085 $ 37,029 $ 37,783 $ 38,614 $ 40,918 $ 40,918 $ 41,287Covered ratio before turbo principal payment 124% 131% 156% 139% 143% 144% 135% 151% 140% 115%Turbo principal payments (b) 10,005 25,520 20,340 14,265 15,735 12,570 14,710 16,620 16,620

Total debt service $ 48,144 $ 61,153 $ 55,569 $ 50,350 $ 52,764 $ 50,353 $ 53,324 $ 57,538 $ 57,538 $ 41,287

Coverage ratio after turbo principal payments (a) 98% 76% 99% 99% 101% 108% 97% 108% 100% 115%

Revenue Bonds-GARVEE (Federal Highway)Revenue - FHWA participation $ 6,254 $ 48,356 $ 48,387 $ 48,382 $ 48,382 $ 48,389 $ 48,391 $ 43,646 $ 44,147 $ 44,182Net available revenue $ 6,254 $ 48,356 $ 48,387 $ 48,382 $ 48,382 $ 48,389 $ 48,391 $ 43,646 $ 44,147 $ 44,182

Debt service (d)Principal $ 0 $ 34,160 $ 32,615 $ 31,075 $ 29,590 $ 28,205 $ 26,910 $ 28,315 $ 28,315 $ 24,560Interest 6,254 14,196 15,772 17,308 18,792 20,184 21,481 15,895 15,895 19,650

Coverage (a) 100% 100% 100% 100% 100% 100% 100% 99% 100% 100%

Revenue Bonds-GARVEE (Gas Tax)Revenue - 2 cents per gallon of the gasoline tax $ 8,981 $ 8,793 $ 8,473 $ 8,275 $ 8,412 $ 8,421 $ 8,579 $ 8,656 $ 9,028 $ 9,409Net available revenue $ 8,981 $ 8,793 $ 8,473 $ 8,275 $ 8,412 $ 8,421 $ 8,579 $ 8,656 $ 9,028 $ 9,409

Debt servicePrincipal $ 4,375 $ 4,185 $ 3,985 $ 3,840 $ 3,710 $ 3,585 $ 3,480 $ 3,730 $ 3,730 $ 3,630Interest 2,839 3,006 3,162 3,304 3,439 3,561 3,667 3,241 3,241 3,335

Coverage (a) 124% 122% 119% 116% 118% 118% 120% 124% 130% 135%

Division of Motor Vehicles Capital Lease (e)Revenue - $1.50 surcharge per transaction $ 2,015 $ 2,015 $ 1,889 $ 2,181 $ 2,098 $ 2,602Net available revenue $ 2,015 $ 2,015 $ 1,889 $ 2,181 $ 2,098 $ 2,602

Debt servicePrincipal - required $ 1,635 $ 1,565 $ 1,500 $ 1,440 $ 1,385Interest 207 281 344 405 409

Coverage (a) 109% 109% 102% 118% 117% N/A

(a) Coverage equals net available revenue divided by debt service.(b) Debt service principal includes "Turbo Maturity" redemptions, whereby TSFC is required to

apply 100% of all collections that are in excess of current funding requirements to the earlyredemption of the bonds. Annual revenues have been sufficient to meet scheduled debt service requirements.

(c) The amount reflected above is less than the amount included in the financial statements for the TSFC as the latter amount includes accreted interest paid in connection with the repurchase of certain capital appreciation bonds as discussed in Note 6. (d) The large variance in Fiscal Year 2016 occurred because the bonds were refunded.(e) Paid in full in fiscal year 2016. Accordingly, coverage information not presented.

Source: Department of Administration

State of Rhode Island and Providence PlantationsSchedule of Pledged Revenue Coverage

Last Ten Fiscal Years(expressed in thousands)

Current Debt Service as Reported in the Prior Year Financial Statements2011 2010 2009 20082016 2015 2013 20122014 2007

221

(in billions)

Percent Percent Percent Percent Percent PercentChange Change Change Change Population Change Population Change

2015 $ 15,324.1 4.4% $ 52.9 3.7% $ 47,669 3.5% $ 50,080 3.6% 321,467 0.8% 1,056 0.1%2014 14,683.1 4.4% 51.0 5.0% 46,049 3.6% 48,359 4.8% 318,857 0.7% 1,055 0.2%2013 14,081.2 2.6% 49.4 2.6% 44,543 2.7% 47,012 2.5% 316,129 0.7% 1,052 0.1%2012 13,729.1 4.2% 48.2 2.8% 43,375 2.5% 45,877 2.8% 313,914 0.7% 1,050 0.0%2011 13,179.6 6.1% 46.9 3.6% 42,298 5.3% 44,621 3.8% 311,588 0.7% 1,051 -0.2%2010 12,423.3 2.9% 45.3 4.1% 40,163 2.0% 42,999 4.2% 309,326 0.8% 1,053 -0.1%2009 12,073.7 -2.9% 43.5 -1.5% 39,357 -3.7% 41,257 -1.4% 306,772 0.9% 1,054 -0.1%2008 12,429.3 3.7% 44.1 2.4% 40,873 2.7% 41,842 2.6% 304,094 1.0% 1,055 -0.2%2007 11,990.2 5.4% 43.1 4.5% 39,804 4.4% 40,788 5.1% 301,231 1.0% 1,057 -0.5%2006 11,376.5 7.3% 41.3 5.8% 38,127 6.2% 38,809 6.3% 298,380 1.0% 1,063 -0.5%

Source: United States Bureau of Economic Analysis

Number in Percent Number Percent

Labor Force Change of Sales Change

2015 555 0.0% 8,673 -0.9%2014 555 -0.5% 8,749 -0.3%2013 556 -0.6% 10,310 14.4%2012 559 -0.7% 9,012 -6.7%2011 563 -1.7% 9,662 -2.9%2010 572 1.1% 9,954 -10.6%2009 566 -1.0% 11,128 14.5%2008 572 -0.4% 9,716 -17.9%2007 574 0.2% 11,837 -11.8%2006 573 2.1% 13,422 -5.5%

Source: This information is provided by the State's revenue estimating conference.

United States Rhode Island

Population

State of Rhode Island and Providence PlantationsSchedule of Economic Indicators

(in dollars)

United States Rhode Island


Existing Single


United States

Amount Amount

Rhode Island

Personal Income Per Capita Personal Income

Schedule of Nominal Personal Income and Per Capita Personal IncomePrior Ten Calendar Years

(in thousands)

Resident PopulationPrior Ten Calendar Years

Amount Amount

Civilian Labor Force Family Home Sales

(in thousands)

222

Rank Employer Employed Percentage Rank Employer Employed Percentage

1 Lifespan 11,964 2.16% 1 Lifespan 10,935 1.91%2 Care New England 8,661 1.56% 2 Care New England 6,611 1.15%3 CVS Caremark Corporation 7,000 1.26% 3 CVS Corporation 5,683 0.99%4 Citizens Financial Group 5,324 0.96% 4 Citizens Fin Grp (Royal Bank of Scotland) 5,500 0.96%5 Brown University 4,191 0.76% 5 Stop & Shop Supermarket 4,455 0.78%6 Stop & Shop 4,142 0.75% 6 Brown University 3,943 0.69%7 Fidelity Investments 3,880 0.70% 7 Bank of America 3,000 0.52%8 General Dynamics Corp 3,563 0.64% 8 Shaw's Super Market 2,240 0.39%9 Roman Catholic Diocese of Providence 3,500 0.63% 9 General Dynamics Corp 2,200 0.38%

10 Naval Undersea Warfare Center 2,732 0.49% 10 The Jan Company 2,115 0.37%

Total employment 555,000 9.91% 573,000 8.14%

Source: Rhode Island Commerce Corporation. Some employers are not listed because they did not wish to participate.2015 information is provided by the RI Department of Labor and Training.

State of Rhode Island and Providence PlantationsPrincipal Employers

2015 and 2006

2015 2006

223

2016 2015 2014 2013 2012 2011 2010 2009 2008 2007Full-time Employees

General Government 2,428 2,364 2,384 2,414 2,337 2,561 2,533 2,474 2,508 2,479Human Services 3,190 3,273 3,353 3,273 3,118 3,247 3,125 3,164 3,671 4,144Education 353 340 359 370 354 358 352 343 365 373Public Safety 3,007 3,029 3,057 3,023 3,002 2,685 2,693 2,684 2,865 2,952Natural Resources 843 879 904 898 887 865 863 890 905 978Transportation 705 735 771 781 797 802 763 708 719 767State Total 10,526 10,620 10,828 10,759 10,495 10,518 10,329 10,263 11,033 11,693


Full Time State Employees as of June 30th for each fiscal year

State of Rhode Island and Providence PlantationsFull Time State Employees by Function

Last Ten Fiscal Years

224

2015 2014 2013 2012 2011 2010 2009 2008 2007 2006General Government

Division of TaxationDollars received electronically (expressed in thousands) $2,732,982 $2,630,196 $2,479,404 $2,422,640 $2,330,068 $2,242,867 $2,135,981 $2,049,159 $2,047,671 $1,920,770Number of business transactions processed electronically 1,042,129 1,026,097 1,160,506 988,669 970,394 917,982 857,553 782,659 767,971 719,800Personal Income Tax returns filed electronically -Tax Year 531,354 505,137 490,000 463,900 451,406 442,383 379,495 349,211 289,346 246,230

Department of Labor and TrainingLabor force total (expressed in thousands) 555 553 554 560 566 569 567 568 577 575Unemployment rate (percentage) 6.7% 7.7% 8.9% 11.1% 11.4% 11.6% 11.2% 7.8% 5.0% 5.1%

Human ServicesDepartment of Children, Youth and Families

Average Number of Children in Out of Home Placement 2,484 2,306 2,141 2,116 2,249 2,201 2,410 2,729 2,436 2,517Number of births (expressed in thousands) 12 11 11 12 12 12 12 13 14 13

EducationOffice of Postsecondary Commissioner

Enrollment - Higher Education 43,335 42,765 42,786 44,504 43,254 43,224 43,409 42,601 41,503 40,374Number of certificates and degrees awarded - Higher Education 7,675 7,400 7,256 6,804 6,500 6,516 6,255 5,754 5,518 5,418

Public SafetyDepartment of Corrections

Incarcerated offenders (male) 3,047 3,060 2,988 3,022 3,084 3,154 3,499 3,567 3,542 3,518Incarcerated offenders (female) 136 154 173 169 189 187 190 204 231 242

Natural ResourcesDepartment of Environmental Management

Hatchery fish raised and restocked (approximated in thousands) 141 145 138 131 114 119 136 148 140 140Park visitations (expressed in thousands) 6,393 1,904 1,302 3,449 5,213 5,386 5,374 5,174 5,928 6,135Recreational registrations (boats) 38,463 38,950 39,012 38,583 40,525 41,158 42,301 42,999 44,000 41,933

TransportationDepartment of Transportation

Vehicle miles traveled (expressed in millions) 7,832 7,677 7,775 7,786 7,901 8,280 8,279 8,188 8,679 8,300

Source: Various Agencies

State of Rhode Island and Providence PlantationsSchedule of Operating Indicators by Function

Prior Ten Fiscal Years

225

2016 2015 2014 2013 2012 2011 2010 2009 2008 2007General Government

Buildings 17 16 16 16 16 15 14 14 15 15Vehicles 161 163 272 257 251 258 260 271 263 238

Human ServicesBuildings 188 205 199 199 196 197 201 200 199 198Vehicles 281 280 291 286 304 337 339 365 360 353

EducationBuildings 13 12 12 9 10 10 9 10 12 12Vehicles 18 17 16 13 14 19 20 20 20 19

Public SafetyBuildings 66 65 65 64 62 59 53 52 52 53Vehicles 656 646 635 643 561 604 586 614 644 580

Natural ResourcesBuildings 81 78 80 80 67 49 47 45 44 44Vehicles 443 416 431 419 426 428 420 423 414 417Number of state parks, beaches, bike paths 25 26 21 21 21 21 21 21 21 21Area of state parks, beaches (acres) 8,038 8,052 8,052 8,052 8,052 8,052 8,052 8,052 8,052 8,052

TransportationBuildings 19 33 23 23 21 19 19 19 19 19Vehicles 606 652 558 547 555 621 611 628 635 708Miles of state highway 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100


Fiscal Year

State of Rhode Island and Providence PlantationsSchedule of Capital Asset Statistics by Function

Last Ten Fiscal Years

226

The Rhode Island Council on the Arts assisted in providing artwork for the State of Rhode Island’s 2016 Comprehensive Annual Financial Report

Cover – State House and Providence Skyline

Photographer: Kevin M. Bernard

Introductory Section – Gilbert Stuart Museum

Photographer: Herman Brewster

Financial Section – Waterplace Park

Artist: Raymond J. Gonsalves

Statistical Section – Waterfire Providence

Photographer: Kevin M. Bernard

2016controller.admin.ri.gov/documents/financial reports/118...2016/06/30 · state of rhode island...

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